CAMWEST: Cyclists’ Action Movement West

Where are fuel prices going?

The fundamental situation of a limited supply capacity for global petroleum and a strong global demand growth for oil and energy means that for the next few years, at least, and in reality for the foreseeable future (decades), oil and energy prices will see continuing strong price increases. However: Geopolitical dramas, economic cycles, seasonal demand variations, and severe weather systems, hot, cold, and cyclones all add volatility to the price, some price movements being predictable and others not. Commodity fuel prices in Australia are then determined by currency exchange rates. Retail prices are a result of commodity fuel prices plus wholesale and retail profit margins, transportation and refinery costs and federal government import duty, fuel excise and GST. A rule of thumb, with the Australian dollar at US$0.75 is; multiply the oil price in US$/barrel by 0.009 for the commodity price in AU$/L then add 70-75 cents per Litre for the other costs and charges. As the price of oil rises so do the other costs and charges.

The price of oil has risen relative to GDP since 1998 (Citigroup 2005) and in actual price since 2002 (EIA). The rate of price rises to date appears to be linear, at a base rate of 33% pa (EIA). During each year there is seasonal price volatility with a yearly peak of about 70% higher than the yearly low or base price (EIA).

With this information it is relatively easy to build a yearly range oil price model with projections into the future. The result has been stunningly accurate so far, though currently, a few dollars/barrel behind actual prices.

Minimum world oil and Australian unleaded petrol prices to 2010:

Year Annual range Petrol AU$/L
2005 US$42-71/barrel A$0.97-1.25/L
2006 US$56-95/barrel A$1.11-1.48/L
2007 US$74-126/barrel A$1.29-1.76/L
2008 US$99-168/barrel A$1.51-2.14/L
2009 US$133-223/barrel A$1.82-2.65/L
2010 US$175-297/barrel A$2.21-3.33/L

From my research I have estimated/guessed that with a price in excess of US$150/barrel the world will be in an economic recession.

-- Danny Hannan


Citigroup, Industry Report; Oil Companies International, The Pump, September 5 2005

Energy Information Agency (EIA). West Texas Intermediate (WTI) crude oil spot prices, History


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