PETROL PRICING IN AUSTRALIA AND THE OPPORTUNITY TO SUPPLY ETHANOL FROM SUGARCANE AND OTHER RAW MATERIALS

AUSTRALIA was dependent on fuel imports to meet about 13% of petrol demand, 17% of diesel fuel demand, and 3% of jet fuel demand in the 2003–2004 financial year. Since that time, both fuel prices and quantities of imported petroleum products have increased. The major elements that affect the prices paid for petrol and other transport fuels in Australia include the world price of crude oil, the Australian-US dollar exchange rate, refinery costs to convert crude oil into petrol, Australian taxes and state government subsidies, retail margins on petrol sales, and day-to-day service station competition. Historical trends in these factors are examined and the cost of producing ethanol from various raw materials compared with domestically produced and imported transport fuel products. At current crude oil prices and exchange rates, ethanol from molasses can compete with petrol on an ex-refinery, tax adjusted basis even when an allowance is made for the difference in performance between the two fuels but ethanol from syrup would be too expensive, except at very high crude oil prices, to be converted to ethanol. However, under the excise arrangements proposed for 2014-2015 when ethanol will be taxed at the proposed rate of 12.5c per litre, the break-even price for ethanol is much lower. Under those assumptions, ethanol from molasses or grain would not be competitive with petrol at a crude oil price of $US60 per barrel unless the cost of producing it was less than 73c per litre. Ethanol from syrup would only compete with petrol if the crude oil price was $US70 per barrel or higher and the sugar price was low, around $250 per tonnne. At higher sugar prices (e.g. $300 per tonne), the crude oil price needs to be nearly $US80 per barrel before ethanol produced from syrup would be competitive with petrol.