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Crude oil fell 9% in July. That’s taken it back toward the lowest levels of the year, which are the lowest levels since 2009.

But even though the Aussie dollar only dipped 1 cent in July, that drop in the implied price of Aussie crude hasn’t filtered through to the prices we’re all paying at the pump.

That’s a conundrum which Westpac senior economist Justin Smirk highlighted in a note to clients on Friday, saying:

“Australian fuel prices are holding at a much higher level that what you would expect compared to the level of crude oil prices, even when adjusted for the AUD depreciation.”

Source: Westpac

If you look at that relationship and ask why it has suddenly broken down and Australian prices have surged, it’s hard not to reach the conclusion “because they, refiners, can”.

Smirk say that perhaps some of the increase can be explained by “the closure of most of Australia’s oil refineries has led to an increase in demand in Singapore for particular standards of gasoline that are specifically required for the Australian market”.

“And that this increase in demand has caught the market by surprise, pushing the price higher due to limited supplies of gasoline of that standard.”

But he says you can’t blame the move on freight prices because “shipping never accounts for more than a few cents a litre on the final pump price”.

Crucially, Smirk says what we can’t be sure of is if it is a market driven (i.e. demand greater than supply) lift in the premium for Australia standard petrol, or is it a lift in retailer/importer margins.

“We don’t have the data to be able to confirm or refute such assertions,” he said. “(In) the last few weeks it does, however, appear that gasoline margins may have peaked.

“We also know that Chinese refiners have been maximising gasoline output and that a number of Chinese and Korean refineries are set to return from maintenance.

“As such, we expect that the supply of gasoline in Asia is set to strengthen through the second half of this year which should squeeze refining margins.”

So, refiners are simply making hay while the sun shines.

The good news however is that this, along with Westpac’s belief crude should stabilise and the Aussie dollar stop falling means that, with refining margins contracting, Westpac sees Australian petrol prices “coming down through the rest of 2015 and into 2016 as the refining margin for gasoline narrows to more normal levels”.

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