The federal government is facing calls from within its own ranks to consider temporarily reducing the fuel excise to save motorists at the bowser

Russia’s invasion of Ukraine has been blamed for a spike in petrol prices from $1.70 to well over $2 a litre.

The fuel excise is a flat tax placed on fuel, currently sitting at just over 44 cents per litre, which the government argues pays for road infrastructure.

Some in the federal parliament have suggested the excise be temporarily halved, and South Australian Liberal Premier Steven Marshall has used his re-election campaign to suggest it be cut.

With a federal election looming, some Coalition MPs want the Prime Minister and Treasurer to find a measure that would reduce cost of living pressures.

Senator Susan McDonald says Australians simply can not afford exorbitant petrol prices.(Instagram: Susan McDonald)

Queensland Liberal National senator Susan McDonald said the government has to do something, and the fuel excise is the “bluntest instrument” available.

“The idea of pausing the fuel excise, or a portion of it, I think is something that we’re going to have to look at,” she said.

Victorian Nationals MP Anne Webster said she has contacted the Treasurer, asking what work had been done around a possible cut to the fuel excise.

Victorian Nationals MP Anne Webster says it makes good economic sense to temporarily reduce the fuel excise.(ABC News: Matt Roberts)

“I contacted the Treasurer’s office last week about this notion of the excise being reduced to ease the burden for residents,” she said

“The information I got back on that was that at that point in time, it was not on the table.”

Ms Webster said a temporary reduction has to at least be considered, so long as it makes economic sense.

Concerns cut to excise might mean cut to roads funding

This is the first time during the current price surge that the idea has been raised within the federal government’s own ranks.

Those proposals were all but dismissed by senior government ministers.

Some others within the Coalition argue it is too early to make dramatic moves like reducing the excise, and say it risks starving the budget of crucial roads funding.

Nationals MP Mark Coulton, whose seat of Parkes covers most of western New South Wales, is urging caution.

“The road network is very important to my constituents, and that fuel excise goes towards the maintenance and construction of country roads,” he said.

Yesterday, Prime Minister Scott Morrison would not speculate on whether the excise would be cut in the coming federal budget but played down the influence of the excise on rapidly rising fuel prices.

The Prime Minister has refused to say whether the excise will be reduced ahead of the federal election expected for May.(ABC News)

The excise raises around $11 billion for the government every year.

The last time the government intervened was in 2001, when then-prime minister John Howard cut it by 1.5 cents and put a pause on half-yearly indexation.

That indexation did not return for more than a decade.

Some economists, like Chris Richardson from Deloitte Access Economics, suggest cutting the fuel excise now would be the wrong option — as it will be difficult to raise again.

The fuel excise generates an annual revenue of around $11 billion for the federal government.(Pexels: Engin Akyurt)

He argues petrol prices could fall again before such a measure even takes effect.

“It may already be last week’s problem,” he said.

“The prices people are paying at the pump today are because of where oil was at the start of last week.

“It’s already about $US1 a litre lower a barrel in markets. If it stays there, that could be anything up to 15c a litre lower in the next week or two in Australia.”

Trucking industry looks at passing costs to consumers

Trucks crawl through a central Sydney street
Trucking groups are less convinced that reducing the excise provides a solution to surging petrol prices.(David Gray, file photo : Reuters)

Consumers could wind up paying for increased fuel costs beyond just the bowser, with the trucking industry looking at new fuel levies to help meet their rising costs.

Some in the industry expect the price of diesel could reach $2.50 within a week, which would amount to a more than 50 per cent increase in three months.

“I think where we’ve reached now is that customers and/or clients are going to be charged a fuel levy with the freight rate,” he said.

“What you’ll find is, these costs will be passed through.”

Mr Mahon said while heavy vehicles do not technically pay the fuel excise — instead paying a lesser “road user charge” of 26.4 cents per litre — reducing the excise may not be a good idea.

He said raising less tax revenue to spend on roads is a significant opportunity cost.

“Any solution that requires government to substantially reduce its income to be able to put into road investment, I think has to be considered exceptionally carefully,” he said.