Fuel – The Facts

The ATA have published a useful guide spelling out the fuel price issues as they currently stand and outlining some of the major bones of contention.

They have listed their points below:

• The average price of diesel in Australia has increased from about 134 cents per litre in October last year to about 184 cents per litre.
• The price of diesel has increased because China’s demand for diesel is surging and all the refineries in Asia are running flat out.
• The Australian price of diesel is tied to the international price because about 30 per cent of the diesel sold in Australia is imported.
• The system that links Australian prices to international prices is called import parity pricing. The Singapore Gasoil price is used as the benchmark for diesel, because Singapore is the region’s major oil distribution and refining centre. Australia imported 7.7 billion litres of refined petroleum products from Singapore in 2006-07.
• For a moment, imagine the Government decided to force fuel companies to sell diesel in Australia for less than the international price. The companies would stop importing diesel, because they would have to sell it here at a loss. In addition, Australian refiners would export their diesel production because the returns would be higher. The result would be immediate and devastating fuel rationing.

• The Australian Government imposes a fuel tax of 38.143 cents per litre on petrol and diesel. The Government’s income from the tax does not increase when the price of fuel goes up, because it is calculated in cents per litre, not as a percentage.
• Trucking operators receive a fuel tax credit of 18.51 cents per litre, so the effective fuel tax paid by the trucking industry is 19.633 cents per litre.
• In addition, Queensland trucking operators and motorists receive a special fuel tax subsidy of 8.354 cents per litre from the state government.
• The other tax on fuel is the GST. The Australian Government collects GST on petrol and diesel on behalf of the states and territories. The GST rate is 10 per cent, so the state and territory governments get more money from this tax when the price of fuel goes up.
• But trucking operators registered for GST can claim a credit for all the GST they pay their suppliers, including the GST they pay on diesel.
• As a result, trucking operators pay a total of 19.633 cents per litre in tax on their fuel, and less in Queensland. As the table shows, this amount does not change when the price of fuel goes up.