Fuel prices fail to drop in line with crude

Fuel is a major cost for grain growing businesses.
Fuel is a major cost for grain growing businesses.

Retail fuel values are yet to follow crude oil values down, after a massive fall in the cost of crude over the past two months.

At present there is a significant gap between crude values and the cost of fuel at the bowser, which has seen groups call on fuel retailers to pass on their savings rather than increase profit margins.

Tobin Gorey, Commonwealth Bank commodity analyst, said in his commodities outlook that crude oil values have fallen over $US20 a barrel over the past two months.

In contrast, retail prices have failed to fall by the same margins since reaching 10 year highs in October.

There was a modest fall in metropolitan fuel prices in November, but many rural areas did not see those discounts.

Instead, diesel prices in rural centres such as Horsham remain to the north of 160 cents a litre.

Given the falling price of the raw product, some commentators have suggested retail fuel companies are simply pocketing a thicker margin.

And in further concerning news for the agriculture sector, with its hefty fuel bills, last week’s move by the Organisation of Petroleum Exporting Countries (OPEC) to limit crude oil production to halt the fall in price saw the first jump in crude values for some time, with the price going up 2.5 per cent on Friday.

However, although crude oil prices mean higher costs for farmers, Mr Gorey pointed out it is not all bad news.

He said high crude oil prices were correlated with higher commodity prices, meaning a rise in oil could see grain commodities go up in value on the global market as well.