Blog & Updates

The Price of Petrol - Annual Review

Author: Barry Scott / Published Date: 23 December 2011

Categories: Novated Leasing, Consultancy

In July we published a blog item entitled “How will the carbon tax affect fuel prices?”

‘John’ commented on the article saying he thought the prices would definitely be affected, the only question was by how much.

So on this last day of the working year, we thought we’d have a look at the price of petrol over the previous 12 months, and see if we can draw any conclusions, or make any reasonable predictions.


 

 

 

 

 


Source: motormouth.com.au


It’s pretty obvious from the above chart that the prices are only  trending in one direction, with an increase of $0.135 over the period.

Is the Carbon Tax responsible for this?

Well the legislation was only passed by the Senate on 8th November, and we don’t have an average for December as yet, but the average for the first three weeks is $1.41, down from November’s average of $1.44.

So the carbon tax has actually reduced the price of petrol so far..?


Efficient markets do, however, price in all available information, so as soon as it was public knowledge that the Carbon Tax was going ahead, the prices should have adjusted to reflect it. This could be why the majority of the 12 month price hike is located in the first half of the year, and then levels off thereafter.

So yet again, is the Carbon Tax responsible for this?

Well, maybe not. If the last couple of years have taught us anything, it’s that despite the tyranny of distance, Australia certainly doesn’t operate independently of the rest of the world – not any more.

Unrest in the Middle East, US debt crises, Greece, Ireland, Italy, and now a European debt crises - all of these social and economic events in the last year, have had widespread repercussions. Uncertainty prevails worldwide, and with it comes caution.

Whether we like it or not, Crude oil fuels the entire planet right now, and in an uncertain world our most important resource is not going to be getting any cheaper.

Let’s have a look at the price of Crude over the last 12 months.



 

 

 

 

 


Source: oilprices.com.au


The trends here reflect the first half of the year increase we saw in the price of petrol. Overall the price of crude is slightly higher than it was 12 months ago, and in that respect again it’s similar to our Australian petrol prices.

The similarities indicate that the dreaded Carbon Tax might not be the only factor here.

So what’s really responsible?

Although there are varying theories about where oil comes from, one of the most widespread and accepted is that it’s a fossil fuel, and was created by pressure, heat, and decomposing biomass over millions of years – millions of years ago.

This theory also contends that there is a finite amount, and it’s been modelled that we’ve passed the half way point – peak oil. If these theories and models are correct, then we’re down to the basic economic fundamental of supply and demand.

Following this theory to its logical conculsion, despite the minor variations possibly caused by taxes, the price of oil is only going one way - until there’s an alternative that is…

Let’s see what happens next year.

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