How does the value of the Australian dollar affect fuel prices?

The largest components of the price we pay for fuel are the international benchmark price and taxes. As the benchmark price of petrol is priced in US dollars ($US), changes in the value of the Australian dollar ($A) against the $US affects the domestic price of petrol.

This means that at times, depending on what is happening with the benchmark price, changes in the $A can make petrol prices rise or fall.

For example, around October 2010, increases in the value of the $A did not lead to lower prices because at the same time, the benchmark price was rising. This meant that because of the strength of the $A, prices remained lower than they otherwise would have been.

When thinking about domestic retail petrol prices it is important to remember that other influences on international and domestic prices also need to be accounted for. The value of the $A is only one of many factors that affect petrol prices. Other factors (such as changes in the levels of local competition) may also influence petrol prices.

For more information on retail petrol prices, see What determines fuel prices in Australia?