Retail price of petrol, diesel influenced by crude oil


RETAIL price movements of petroleum products like petrol, diesel and kerosene are mainly dictated by crude oil price movements, says Independent Consumer and Competition Commission.
Commissioner and chief executive Paulus Ain said crude oil was used to produce these petroleum products. Crude oil price movements are mainly dictated by the following:

  • Demand for oil by major oil consuming economies such as China, India, and the United States. When shale oil production is low, the US usually becomes a major oil consumer;
  • supply of oil from the major oil producers such as the Organisation of Petroleum Exporting Countries (Opec) and Russia and the US.
    US is leading shale oil producer and its shale oil stock also has a major impact on global oil prices; and
  • Geopolitical and trade issues have a major impact on global economic activities, thus they also have a major impact on oil prices. This is the case where geopolitical and trade issues affect the production, supply and trading of oil.

Ain said while the Independent Consumer and Competition Commission was responsible for setting the annual wholesale and retail margins, and the monthly fuel prices in the country, it did not have any control over several components that fed into the retail price build-up.
These components were:

  • Import parity prices (IPP) which is mainly influenced by the Mean of Platts Singapore (Mops) prices for petrol, diesel and kerosene, and the PNG-kina US dollar exchange rate. The Mops price movements are mainly influenced by international oil price movements. Nevertheless, the IPP usually accounts for 50-60 per cent of monthly retail prices and is usually a pass through cost in the retail price build-up; and
  • The domestic road and sea freight rates are also pass through costs in the retail price build-up. For centres like Kavieng, the total freight can be as high as 30 per cent of the final retail price.