The closure of most of Australia's oil refineries has led to an increase in demand in Singapore for particular standards of gasoline that are specifically required for the Australian market.
And that this increase in demand has caught the market by surprise pushing the price higher due to limited supplies of gasoline of that standard. In part this may be true as the spread from Singapore gasoline to Australian pump prices has widened meaningfully this year particularly in the second quarter.
The rise on the spread to higher freight rates cannot be blamed. Through Q1 the Australia dollar price for tanker freight rates out of Singapore (to Australia) rose 6.4%, then a further 3.8% through Q2.
However, shipping never accounts for more than a few cents a litre on the final pump price. Freight rates are not behind the surge the pump price spread to Singapore.
If it is a market driven (ie demand greater than supply) lift in the premium for Australia standard petrol, or is it a lift in retailer/importer margins is still not sure. The data is not able to confirm or refute such assertions.
"Australian petrol prices are expected lower in CPI forecasts for 2015/2016 due to a narrowing of the refining spread", forecasts Westpac.


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