Caltex expects to post a profit after tax on a replacement cost of sales operating profit (RCOP) basis of $315 – $335 million, compared with $199.7 million for the full year 2003.

But this estimated profit range could be affected by movements in crude prices, margins, exchange rates and other external factors between now and 31 December 2004, Caltex said.

The main reason for the increase in profit was increased refining margins, Caltex managing director Dave Reeves said.

Refining margins had averaged $US5.94 a barrel in the first 11 months of 2004, up from the 2003 average of $US4.91 a barrel, and well up from the 1999 to 2003 average of $US2.57 a barrel.

"We just happen to be in a period of time when the external market is working extremely well for us," Reeves said.

He argued that perceptions that an alleged failure of petrol prices to reflect the recent fall in international crude prices had been inflated oil company profits were not correct.

"The average fall in pump prices for petrol across major capital cities since late October has been 4.5 cents per litre," Mr Reeves said.

"This is in line with the relevant change in international prices and exchange rates, which has also been 4.5 cents per litre.

Australian petrol prices are not directly related to crude oil prices but were driven by the international market price for petrol, and this in turn was driven by availability of supply and demand for petrol from Singapore refineries, Reeves said.

“Australian refineries must compete against products imported from overseas refineries and Singapore is a major refining centre,” he said.

"Changes in Singapore petrol prices are often quite different from changes in crude oil prices because of the strength or otherwise of the demand for petroleum products.

Reeves said in the short-term, prices were most affected by local competition, which had been intense.