Singapore Petrol Fell 10 Cents a Litre. Here's Why Your Servo Lags

If you filled up in mid October and felt the price should already be coming down, you weren't imagining it. The fall was real. It just hadn't reached the bowser yet.

In the week to Friday 16 October, the Singapore benchmark for 95 octane petrol, which sets the starting price for almost every litre sold in Australia, dropped from 135.9 to 126.1 cents a litre in Australian dollar terms, according to the Australian Institute of Petroleum (AIP). That's close to 10 cents gone in five trading days. Over roughly the same stretch, the national average pump price for unleaded went up 1.6 cents to 242.1.

So where did the saving go? And why is diesel now heading the other way?

The cuts are starting to land

The ACCC's latest weekly monitoring report, its 33rd since the Middle East conflict sent prices soaring in March, put the average petrol price across Sydney, Melbourne, Brisbane, Adelaide and Perth at 236.2 cents a litre on 21 October. That's 5.7 cents lower than a week earlier.

The NRMA's weekly report on Monday had Sydney's regular unleaded at 236.0 cents, with Sydney wholesale unleaded down another 6.3 cents over the previous week. It expects the average to slip into the low to mid 230s this week.

Diesel is a different story. It did dip 1.9 cents to 276.6 in the ACCC's five city figures for 21 October, but the wholesale market has since turned. The same NRMA report shows Sydney wholesale diesel up 4.2 cents to 267.7, and the international diesel benchmark up 5.1 cents, even as the petrol benchmark fell 3.4. The NRMA expects diesel prices to rise this week.

Here's what's really going on behind the scenes

Australia is what the industry calls a price taker. Imports met 80.8 per cent of the refined fuel we used in the 2024 to 2025 financial year, and even our two remaining refineries, at Lytton in Brisbane and in Geelong, sell into a market priced off Singapore.

Wholesalers turn that Singapore price into a terminal gate price, which is what a retailer pays to fill a tanker, using a method called import parity pricing. The formula uses a rolling average of recent Singapore prices rather than the latest day's number. The AIP says this creates a lag of one to two weeks, and it works in both directions. It softened the rise on the way up. Now it's slowing the fall.

The daily figures show it. Sydney's terminal gate price for unleaded slipped every weekday from 242.0 cents on Monday 12 October to 235.5 on Friday 16 October, as the cheaper Singapore days worked their way into the average.

The backstory here is a good one. Until 1 August 1998, the ACCC itself set a maximum wholesale petrol price using import parity. The Howard government scrapped those controls partly because, as a later Senate inquiry recorded, the endorsed maximum had become a target that capital city prices snapped back to at the end of each discount cycle. The regulator stepped back, but the formula stayed. The AIP says today's method is very similar to the ACCC's.

Then the servo adds its own lag

Wholesale is only half of it.

The AIP's figures show the gap between the average pump price and the average wholesale price was just 3.3 cents a litre in the week to 18 October. Over the past 12 months it has averaged 13.3 cents. That gap isn't profit (it has to cover freight from the terminal, wages, rent and power), but it tells you which way the pressure runs. When wholesale prices climb fast, retailers tend to swallow part of the rise. When wholesale prices fall, they win that margin back before passing on the full saving.

Economists call this rockets and feathers. Prices shoot up like a rocket and drift down like a feather. A University of New England study that tracked prices at 111 locations from 2007 to 2012 found around a quarter of the servos it reviewed priced this way, and in Canberra prices fell roughly five times more slowly than they rose. The lead researcher singled out Western Australia, where FuelWatch makes every servo hold its price for 24 hours, as the one place everyone appeared to be doing the right thing, though he couldn't prove FuelWatch was the reason.

To put this in perspective, official government fuel price schemes now cover every Australian state and territory. The UK only forced its forecourts to report price changes within 30 minutes in February this year.

Why diesel is going its own way

Petrol and diesel come from the same barrel of crude, but they're priced off different Singapore benchmarks and they answer to different seasons. Petrol demand eases once the northern summer driving season ends, while diesel's close cousin, heating oil, gets busier as the northern winter approaches.

This year the squeeze is sharper. On 21 October French President Emmanuel Macron made a surprise visit to Riyadh and came home with a Saudi commitment to keep sending extra diesel to France "for as many months as necessary", plus additional cargoes from the UAE and Bahrain. Washington has spent weeks debating limits on US diesel exports, although Energy Secretary Chris Wright has said a blanket ban won't happen.

Australia is more exposed to that scramble than most. Saul Kavonic of MST Marquee told the ABC last month that we account for about 1 per cent of world fuel demand but around 10 per cent of seaborne diesel imports. Mines, farms and trucks all run on it, and the grain harvest is getting under way.

The latest government stock figures show diesel at 31 days of cover on 20 October, a day under the March quarter average, while petrol sits at 39 days. The government has also extended a temporary 20 per cent cut to the reserves suppliers must hold until 31 January 2027, explicitly to keep fuel moving through harvest and the summer holidays.

What this means for you at the bowser

The practical upshot for your wallet depends on what's in your tank.

Petrol drivers in the big capitals are heading into a better patch, but prices there still cycle, so the day you fill up matters as much as the trend. Check unleaded petrol prices before you head out, and learn the best time to fill up where you live.

Regional drivers should expect to wait longer. The AIP's regional average was 244.9 cents in the week to 18 October, against 240.7 in the capitals, and it rose faster that week too. Country servos generally sell less fuel and face fewer rivals, so cuts take longer to show. Regional Northern Territory averaged 284.5 cents.

Perth motorists have an edge. Under FuelWatch, servos lodge tomorrow's price by 2pm and must hold it for 24 hours from 6am, so you can see a cut coming before it lands.

If you run a diesel ute, a tradie van or anything towing a caravan, don't bank on relief just yet. Keep an eye on diesel prices, fill up when you see a fair price, and take Energy Minister Chris Bowen's advice to buy the fuel you need, "no more and no less".

The bigger picture

This year has given a lot of motorists a crash course in how our fuel market works. We don't set our own prices. Singapore does, through a formula close to the one Canberra stopped running in 1998. What has changed is how much you can see: wholesale prices are published every weekday, and every servo's price in real time.

Worth keeping in mind:

Knowing how the lag works means you can see the next fall coming, and the next rise too.