When it’s time to fill up your car with petrol, paying extra at the pump can be costly.

You may have questioned why one petrol station is able to offer discounted rates while others seem to have consistently high prices.

Finding answers can be confusing and there are myths about what controls prices and how they’re determined.

But the answers are not as straightforward.

What determines fuel prices?

According to the Australian Institute of Petroleum (AIP), fuel prices worldwide are determined by regional markets, benchmark prices and government taxes that apply in those markets.

Australia’s regional market for petroleum products is the Asia-Pacific and the trading centre for this market is in Singapore.

The Singapore price of unleaded petrol, known as MOGAS95 Petrol, is the key pricing benchmark for Australian petrol.

According to the ACCC, changes in Singapore prices can take about two weeks to influence the supply chain in Australian cities and longer in regional areas.

The price at the pump can be broken into three major categories: the purchase cost of petrol, the shipping cost and government taxes.

Petrol is either produced at Australian refineries or shipped by tankers from across Asia to import terminals around the Australian coastline.

Trucks deliver the petrol to service stations from these locations, which can shift prices.

Typically, petrol prices within Australia tend to be higher the further the petrol must travel to get to the pump.

Petrol prices in regional locations are generally higher and more stable than those in the capital cities.

But there are several factors that influence what motorists ultimately pay at the petrol pump, including the rise and fall of oil prices.

Compare The Market expert Chris Ford said other factors at play could be the strength of the Aussie dollar, with a “weaker dollar” having the potential to affect purchasing power.

This could therefore increase prices for motorists.

“Another is the wholesale price — the price that retailers pay for the fuel they sell on to motorists,” he said.

Do petrol prices differ per city?

Compare The Market analysis showed wholesale petrol prices remained steady from October through November, leading to less price spiking than in the past.

The national average price for unleaded petrol is currently at the $1.69 a litre mark, noticeably lower than the peak price of $1.89 a litre back in April, according to Compare The Market analysis.

The national average can vary between each major city and where they are in their fuel pricing cycle.

A fuel pricing cycle is when petrol prices fluctuate in regular patterns in Australia’s largest cities, with each city having its own unique pricing cycle. This is where prices can dip for a certain period and then increase sharply.

Mr Ford said on average, fuel pricing cycles lasted about five to six weeks in Brisbane, Melbourne and Sydney, but could vary.

Perth has a weekly cycle, and Adelaide’s cycle is usually about two weeks.

“Even within the same city, our analysis shows that the difference between the cheapest petrol station and the most expensive can be as high as 53 cents a litre. That equates to a $26.50 difference if filling up [with 50 litres] at the cheapest station rather than the most expensive,” Mr Ford said.

Source: Compare The Market’s Simples App as of 26/11/24

Why can you get cheaper petrol at certain petrol stations?

The petrol industry is competitive, therefore choice on pricing is usually left to the discretion of individual retailers.

“In an area or suburb with a lot of competition, being the first petrol station to increase prices could result in fewer sales, so it’s in a retailer’s best interest to keep prices as low as possible to attract customers,” he said.

But a lot of the time, when one station increases its prices, others nearby follow suit.

“When offering lower prices doesn’t remain viable or a station’s profit margin is too small, they will begin to increase prices, which is what we see in each city’s regular fuel pricing cycles,” he said.

This can be why regional areas with less competition may boast higher prices — there’s not as much of an incentive or reason to offer lower prices.

But the AIP said Australian petrol prices were actually considered low compared to overseas prices.

They said prices were the lowest among Organisation for Economic Cooperation and Development (OECD) nations in the Asia-Pacific market.

The OECD consists of 38 countries, including Australia, New Zealand and Canada.

Is there any truth to cheap petrol on Tuesdays?

There is persistent advice purportedly based on insider knowledge that motorists could save money at the bowser by filling up on Tuesday night.

But Mr Ford said: “Cheap Tuesdays are really a thing of the past now.

Because fuel stations are free to set their prices as they please, they can take advantage of how often people are using the pump.

Mr Ford says it is usually locations along main roads, freeways or areas with higher volumes of traffic that are the first to move when a fuel price cycle begins.

What’s the best way to save on petrol?

The best way to save at the petrol pump is to shop around.

It’s become a lot easier to save a few dollars if you know what the prices are in advance.

There are numerous apps that geolocate the cheapest fuel in your neighbourhood.

“In the same way that Australians have become good at looking for deals before doing their grocery shop or shopping around when their insurance renewals come through, motorists should be doing the same before filling up the tank,” Mr Ford said.

He also said fuel deals through apps and supermarket incentives like Woolworths and Coles could be a good way to save money.

Roadside assistance programs and energy retailers can also offer discounts on fuel simply for joining up.