Refinery Margins on Unleaded Hit 29 Cents a Litre, Up From 1.2 Cents

Over the three months to September, the slice of every litre of unleaded that pays for turning crude oil into petrol averaged 29 cents. A year earlier it was 1.2 cents. That single number, tucked inside the RACQ's latest quarterly fuel report, explains more about your fuel bill this year than almost anything else.

The report that landed on Wednesday

The RACQ published its September quarter fuel price report on 14 October, and the headline was all about Brisbane. Drivers there paid an average of 199.2 cents a litre for regular unleaded over the quarter, 10.6 cents more than in the June quarter and the highest of the five biggest capitals. Diesel eased slightly, from 245.6 to 242 cents, but Brisbane still topped that table too. Melbourne, Sydney, Perth and Adelaide all averaged above 195 cents for unleaded and 235 cents for diesel.

The real story sits further down the page. According to the RACQ, the refinery margin on unleaded jumped from 1.2 cents a litre a year ago to 29 cents in the September quarter, a rise of more than 2,300 per cent. On diesel it went from 8 cents to 62.3 cents. Meanwhile the margin left for service stations on petrol fell from 11 cents in the June quarter to just 3.7 cents.

RACQ spokesperson Tristan Vorias put it plainly. The big fuel companies appear to be making little at the bowser, and "it seems they are making up for it further upstream at their refineries."

A refinery down the road doesn't make petrol cheaper

Here's the part that surprises most people. Brisbane is home to one of Australia's two remaining oil refineries, Ampol's plant at Lytton near the mouth of the Brisbane River. (The other is Viva Energy's refinery at Corio, just outside Geelong.) Back in 2000 the country had eight. So why does the city with a refinery on its doorstep pay the most?

Because Australian fuel isn't priced on what it costs to make here. Wholesale prices follow a formula called import parity pricing, which asks what it would cost to buy refined petrol in Singapore and ship it to Australia. According to the Australian Institute of Petroleum, the Singapore benchmark makes up around 95 per cent of that import parity price, with freight, insurance, terminal costs and a wholesale margin making up the rest before excise and GST are added. The AIP describes the local refining sector as a "price taker."

The upshot is that a litre refined at Lytton is priced as if it came off a tanker from Singapore. When the gap between the price of Singapore petrol and the price of crude oil blows out, every servo in the country pays it, and the two local refiners collect it on everything they produce.

Ampol's own numbers show how dramatic the swing has been. Its Lytton refiner margin averaged US$28.26 a barrel in the first half of 2026, against US$7.44 a year earlier, and the company reported record half year earnings in August. Divide by the 159 litres in a barrel and that's roughly 18 US cents a litre. The cause is no mystery: the Middle East conflict that began in late February squeezed refining supply across the region, and the price of finished petrol rose faster than the price of crude.

Brisbane's extra sting has a local explanation too. RACQ's Dr Ian Jeffreys says the city "can be more expensive because it has fewer independent stations, reducing competition."

The safety net with no ceiling

There's a backstory here that rarely gets airtime. In 2021, after BP shut its refinery at Kwinana Beach in Western Australia and ExxonMobil announced it would close Altona in Melbourne, Canberra introduced the Fuel Security Services Payment. The idea was simple: keep the last two refineries open by paying them up to 1.8 cents a litre when refining margins fall too low to cover costs.

In March this year the scheme was made more generous. The margin level below which payments start was lifted from 6.4 to 10 cents a litre, so support now kicks in sooner. The cap stayed at 1.8 cents.

To be fair, 2026 has shown why the scheme exists. When the crisis hit, Ampol pushed Lytton's scheduled maintenance from June to August so it could keep producing about 300 million litres of petrol, diesel and jet fuel at home. The federal government also temporarily relaxed sulphur limits so roughly 100 million litres a month of Lytton petrol could be sold here instead of being exported.

But the arrangement only works one way. It pays when margins are thin and simply switches off when they're fat. Nothing comes back to motorists or taxpayers when the refining slice runs at 29 cents a litre.

What this means at the bowser

First, the quarterly averages are already out of date. Petrolmate's records of Queensland government price data show Brisbane unleaded averaging roughly 178 cents in July, 203 cents in August and 222 cents in September. So far in October it's running at about 239 cents. That climb tracks the end of the fuel excise discount on 2 August as well as the margin surge. Queensland drivers who think of 199 cents as the average are in for a shock.

Second, with servos keeping only a few cents a litre on average, the savings sit in the gaps between them. Across roughly 280 servos in greater Brisbane this week, unleaded petrol prices ranged from 227.5 to 251.5 cents. That 24 cent spread is worth about $12 on a 50 litre tank, which beats most loyalty discounts comfortably.

Third, timing matters. The RACQ warned in July that south east Queensland's price cycle was coming back, and ACCC data has Brisbane's cycle historically averaging about six and a half weeks, the longest of the major cities. Buying near the bottom rather than straight after a hike is the easiest win going. Our guide to the best time to fill up explains how to spot where you are in the cycle.

And regional Queensland isn't always dearer. Over the September quarter Beaudesert was the cheapest of the regional centres the RACQ tracks for unleaded, at 193.5 cents, and Kingaroy also came in under Brisbane. Longreach was the most expensive for both unleaded (229.2 cents) and diesel (256 cents), while Tully was cheapest for diesel at 233.9 cents.

Would another refinery fix this?

In July the federal and WA governments agreed to jointly fund a $4 million early feasibility study into a new refinery proposed by Perdaman in Western Australia, which would be the first built in this country in more than 60 years. It might well improve supply security. But under import parity pricing a third refinery would be a price taker too. On its own, it wouldn't stop Singapore margins flowing through to the bowser.

Dr Jeffreys argues the faster levers are closer to home: "Electrification and biofuel use are the quickest ways to improve fuel security." His broader point is hard to argue with. "The more we can rely on our own sources, the less vulnerable we will be to oil price shocks."

There's also some cause for patience. Refining margins have a history of falling quickly once supply loosens, as they did after the spike that followed Russia's invasion of Ukraine in 2022. When this one turns, it's the part of the price with the most room to come down.

The short version

Refining margins rarely make the evening news, but this year they've quietly set the pace at the bowser. Keep an eye on them. When they fall, they should take a good chunk of the price with them.