@Termoil: the lag simply reflects the fact that I have more up-to-date data on wholesale crude oil prices than on Sydney retail prices.

The grey line takes daily Brent Crude prices (expresses in Australian dollars) and plugs it into the regression model, while the blue line shows monthly average prices at the pump in Sydney. I obtained the pump data from the Australian Automobile Association (AAA) and, checking again today, the most recent data they have is for May. If anyone knows a better source for retail prices, please let me know!

The average price in Sydney for May was 150.8 cents/litre and, if the pattern implied by the model persists, it is certainly pointing to increases from there: it predicts an average price of 168.3 cents/litre for June and, based on prices so far this month, an average of 174.6 cents/litre for July. Of course, there are certainly factors that the model does not capture and in April and May the pump prices were lower than the model price. Nevertheless, we can be very sure that while crude prices continue to rise, we'll be paying more to fill our tanks!

In another post I calculated the cost of carbon for petrol. It's interesting to note that if an emissions trading scheme were to apply to petrol, prices can be expected to rise by around 5 to 7 cents/litre. Compare this to the effect of rising crude oil prices: from January to May this year averaged Sydney petrol prices rose by 10 cents/litre!

Sean (don't be thrown by the cryptic smc2911 handle!)