Where are the cheapest fuel prices in Australia and why is the cost of petrol so different in each State?

For most Australians buying petrol is a necessary but unavoidable evil that can break a family’s weekly budget in the current cost of living crisis.

But when and where a motorist chooses to top up their tank will determine how much they pay and the difference can be as much as $50.

This week drivers will be hit hardest in the Australian Capital Territory where petrol is on average $2 a litre while Western Australians will be filling up for $1.82 a litre, the cheapest price of all states and territories.

NRMA spokesperson Peter Khoury said the price of petrol varied not just from state to state but from street to street and said it was not uncommon for prices to vary by about 60 cents but said the price tended to be lower in some cities.

“Consistently Perth and Adelaide are cheapest,” he said.

“It’s one of the challenges, there’s no regulation about what service stations charge so you always get a massive spread of prices.”

In the capital cities, Brisbane has the highest average price of $2.13 per litre while Adelaide is the cheapest, with petrol costing $1.70 a litre.

In Adelaide there is a huge independent market.

Mr Khoury said independent brands tended to compete on price, sacrificing profit margins for customer loyalty, and said a high concentration of independent retailers in an area tended to keep a downward pressure on prices.

“In Adelaide for example there is a huge independent market,” he said.

In contrast, Mr Khoury said prices in Canberra and Brisbane were often some of the highest in the country due in part to the comparatively low number of independent petrol stations.

How are petrol prices determined?

Petrol prices in Australia are largely unregulated although the prices in some capital cities including Perth, Adelaide, Melbourne, Sydney and Brisbane are impacted by varying price cycles.

Compare The Market spokesman Chris Ford said there was a bit of folklore around the introduction of fuel price cycles by competing retailers in the nation’s capital cities, which he said happened about 40 years ago.

He said WA, which regularly has the cheapest petrol in Australia, had the most extreme cycle due to the state’s mandatory price reporting system that had effectively trained customers and retailers when to purchase petrol.

“Melbourne, Sydney and Brisbane are fairly interlinked, the east coast has slower cycles but they are a bit stickier,” said Mr Ford.

“Adelaide is somewhere in between the east coast and Perth in its price cycle, every two to three weeks there is a sharp increase and a sharp decrease.”

Why do petrol prices vary so much from State to State?

Mr Ford said the sometimes dramatic variation in prices meant customers could be forking out an extra $50 depending on where and what day they refuelled with the exact same petrol.

Canberra, Hobart and Darwin do not have petrol price cycles and diesel is largely exempt from the same dramatic fluctuations in price.

Macquarie University senior lecturer Lurion De Mello said that WA petrol retailers fixed their daily price at 6am whereas in states such as NSW, the price could jump by 50 cents a litre in a day.

“I think the variability of the price is something that could be looked at by the ACCC [Australian Competition & Consumer Commission] if there’s no oil price movement or any geopolitical events or shocks to the market, then the petrol price shouldn’t vary by so much,” said Dr De Mello.

“The fuel prices in Germany the highest and lowest price could be 10, 12 cents and then it [price] gradually drops off.

“You certainly don’t see petrol prices jumping by 50 cents.”

The ACCC monitors petrol prices in the nation’s capital cities but does not set the price nor regulate fuel prices.

The price of Australian petrol is based on the Singapore petrol price, also called MOGAS95, plus shipping costs and taxes, including the fuel excise and the goods and services tax.

According to data compiled for the Australian Institute of Petroleum, the wholesale price of petrol for all of Australia this week is $1.73 per litre.