Oil prices are dropping. This is when Australians will see the benefit

Petrol prices at the bowser are predicted to fall below $1.70 per litre, but a motoring expert says some cities will have to wait weeks before seeing the savings.

Fuel prices are predicted to drop to their lowest point since last January. Source: AAP / Diego Fedele

Key Points

• Petrol prices in Australia are expected to fall following a drop in world oil prices.
• Motoring expert Peter Khoury said prices could fall to their lowest since January 2023.
• Khoury said motorists in some regional towns are already seeing low prices, but those in cities will wait longer.

The cost of petrol in Australia is set almost exclusively by external factors, the most significant of which is world oil prices.

Over the past week, the unleaded price benchmark for motor gasoline fell US$3.3 ($4.86) per barrel to US$87.3 ($128.67) per barrel.

NRMA motoring expert Peter Khoury says the cost per barrel has been dropping for weeks, which is good news for consumers.

"Average [petrol] prices are predicted to fall to well below one dollar and seventy cents, the lowest prices since January of last year," he said.

"Regional areas, like in New South Wales, are already enjoying lower costs."

But in larger metropolitan areas motorists will have to wait.

"Price cycles in the cities vary, Sydney and Brisbane for instance are at the top of their cycle, so it will take longer to come into effect," he said.

"Meanwhile Perth for example has a seven-day cycle, so those prices are updated more frequently."

It could take weeks before petrol prices fall in Sydney and Brisbane. Source: AAP / Flavio Brancaleone

The NRMA said the average price for regular unleaded fuel in Sydney on Monday was 192.3 cents per litre.

The FuelPrice Australia website said the average price for the same fuel in Brisbane on Tuesday was $1.96 per litre. In Melbourne, the average price has already dropped to $1.71 per litre.

Petrol price cycles are the result of the pricing policies of local petrol retailers and do not occur in Canberra, Hobart and Darwin.

Global oil prices are the largest determinant in domestic petrol prices, but other factors impact the final costs for consumers.

Other factors at play

The Australian government has a tax on petrol, called the fuel excise, which is just under 50c per litre. This excise is also subject to GST.

It is then up to the oil companies to set their profit margins.

"People in Sydney, Brisbane and Melbourne pay some of the highest petrol prices in the country," Khoury explained.

"Perth and Adelaide tend to be cheaper."

Typically, competition in a market will drive down the prices for products, but Khoury says that's often not happening in the largest cities.

"There appears to be an unwillingness among the Sydney, Brisbane and Melbourne oil companies to pass on those profits to consumers," he said.

"The more drawn-out fuel cycles in these cities also means motorists are paying higher prices for longer."