The price of fuel!!

I know you, and everyone else, is looking for someone to blame for high gas prices but you've got it all wrong. The oil companies are not to blame. That's not what you want to hear so you probably won't believe me but that is the reality. They are benefiting from the high prices but they are not causing the high prices. Simply put, oil and gas prices are determined on world commodity markets. They are NOT determined by the oil companies. The oil companies sell their oil for whatever the market will pay, whether that's $10 per barrel or $70 per barrel. And while the foundation of the price is supply and demand, there's a lot more than supply and demand that determines what the markets will pay for oil. I'm not going to bore you with the specifics of the situation in this thread but the average American needs to better understand the realities of the market for oil since it significantly affects their lifestyle. If you would like me to explain further, I would be happy to but I don't necessarily want to stray any further off the original subject of the thread.
Randall

 

True, Chinese demand is up. That is one component that is helping contribute to the current $69 oil price. The cnn link posted above by The Commissioner shows the wide spectrum of gas prices from country to country. Gas prices are different from oil prices in a few significant respects. In particular, taxes, subsidies, refining capacity and "oil rights" or ownership of the resource. The cnn link shows the following prices per gallon as of I assume today's date 6/9/06.

AUSTRALIA SYDNEY $2.63
CHINA TIANJIN $1.54
CHINA SHANGHAI $1.48
NORWAY STAVANGER $5.07
NORWAY OSLO $4.93

As for taxes, the gas we buy at the pump is taxed differently in different countries. It also varies by state here in the US. In April of 2006, the average breakdown for gas at the pump in the US is as follows. Link.
17% - Taxes
3% - Distribution & Marketing
26% - Refining
54% - Crude oil

So here in the US in April we were averaging 17% in Taxes right now. I can't tell you what the taxes are in Australia or China but you will notice it is the third largest component here in the US. In some other countries such as Norway, the taxes are a much more significant percentage of the final cost. And Norway has some of the highest reserves of oil in the world. So this leads to subsidies. Some countries subsidize the gas that is sold in their country. In other words, the government is absorbing some of the cost of the fuel in order to keep prices low. China could be doing this. I'm not sure.

Next, you have the oil ownership issue. In most countries, the gov't/state/nation owns all of the mineral resources but this is not the case here in the US. In many cases the oil is produced and refined in conjunction with the big oil companies through deals made which typically gives part ownership to the oil company while the nation retains the majority of ownership. This is simply a matter of hiring trained professionals to get the job done. You can "hire" an oil company to produce oil the same as you would "hire" a mechanic to fix you car. In both cases this assumes you don't know how to do it yourself. However, many countries (Saudi Arabia, for example) have started through deals with oil companies but over time have trained their own and now control their own production. These countries can do whatever they want with their oil and if they own and produce it, they don't have to pay the market price. So, the cost of a gallon/liter of gas is essentially whatever it costs them to produce and refine the oil and transport and market the gas. It might only cost them $10 a barrel to produce the oil and that leads to significant savings in the final cost of gas since you don't have to pay the $69 open market price. Examples...Venezuela and Saudi Arabia, etc.

The gas we buy is typically refined from the oil which is sold on the market for today's price of about $69. In the US, refining was 26% of the price per gallon in April. The refining price can vary depending upon your country's refining capabilities, not to mention the cost differences in refining sweet crude versus sour crude. In the case of the US, we do not have the refining capacity to keep up with demand so we import gas as well as oil. Many countries do this.

So, in the end, you ask why China's gas is cheaper than Australia and I don't know the specifics for each country and therefore I cannot tell you specifically, but I believe the answer lies largely within the parameters of what I discussed above. My guess is that it is difference is in taxes and subsidies.

This is definitely an oversimplification of the dynamics involved but I hope it gives a small idea as to some of what goes into the final cost at the pump.
Randall