With the recent shortages of fuel in the USA, this article will explore the price patterns, risks to importing and effects of recent regulation in Australia’s fuel industry. It’s no secret that fuel is the lifeblood of many industries, as well as being required by individuals to complete day to day life. Australian fuel companies are moving away from production to importing and storage. With fuel prices low compared to the living wage, will shortages in fuel exporting countries increase prices?

Price Pattern

Australians often complain about high fuel prices and reminisce of a time when fuel was under a dollar per litre. The reality might not reflect the widespread views. A Compare The Market Petrol Comparison discovered that Australia was behind only the United States for most affordable countries for fuel. This is was based off the cost of filling a tank divided by the average monthly income of the country.

With the current shortages due to a cyberattack on critical fuel infrastructure, the East Coast has seen dramatic price increases, meaning Australia may have taken the #1 position. While it is true that the prices of fuel are increasing, when you adjust for inflation and increased wages, price increases are aligned correctly. Combined with increased competition as more and more petrol station companies enter the market, prices largely benefit the consumer. So much so that many large companies are choosing to convert their production facilities to storage for fuel imports.

It is currently unclear the effects of the USA shortage on the global fuel economy, however, if the USA is forced to import fuel, exporters may take advantage of the situation and increase prices for all, knowing that the vulnerability the USA is in.

The impact of Covid-19

Covid-19 is a dangerous virus, luckily in Australia, we have not seen the devastating effects it can cause. Those that work at Import facilities are currently some of the most at risk of catching the virus due to the interactions with various people from more heavily infected countries. As such, the potential for an outbreak to occur at one of these facilities, causing workers to quarantine is prevalent. While the sunk costs the company incurs hiring and training new staff during the potential quarantine period is unlikely to be felt in the consumer’s pocket.

Ultimately, Covid-19 has resulted in the lowering of fuel prices as more industries have been in lockdown or have employees work from home, resulting in less usage of machinery and infrastructure that requires fuel to operate. This means the supply of fuel available for the consumer has increased, lowering prices. In developed countries, petrol is normally more than $1/L. However, in 2020, average fuel prices fell to just $0.91/L.

Future strategies Government has in place

The government has an interest in ensuring that fuel prices are fair for suppliers and consumers. Some future strategies to create a consumer-friendly fuel environment are to increase the amounts of consumer choice, stimulating industry development and reducing emissions. To do this, the government has three solutions to achieve the goals. They include addressing the barriers of new vehicle technologies, investing in new technology to drive the private sector and finally, improving access to information for consumers.

One method that the government has implemented to improve information is to improve transparency. Petrol stations are now required to provide updates to fuel companies every 30 minutes. This data can be used to compare prices in the different areas, meaning the consumer can easily find the cheapest fuel nearby.

The Fuel industry is a fluid, ever-changing market. The high value of fuel in day to day life means that it something that everyone should keep an eye on and can even influence voting decisions. While there is no immediate threat of a fuel shortage in Australia and the effects of the USA shortage are likely to be minimal on the Australian market, we recommend if you see cheap fuel, to fill the tank.