Fuel prices are set to increase as the tax cut made by the previous government six months ago has ended.
Fuel excise was halved in Australia to ease cost-of-living pressures, but the new government said it had no choice but to return it to its normal rate.
Here’s what you need to know:
1. What’s happening with the price of fuel?
The price of fuel is set to increase.
In March, the previous Coalition government halved the tax charged on each litre of fuel sold in Australia, dropping it from 44.2 to 22.1 cents.
The temporary discount ran for six months and ended at midnight.
The move was aimed at lowering fuel costs and easing cost-of-living pressures.
Then-treasurer Josh Frydenberg flagged at the time that it would take two weeks before the tax break would be passed on.
But it ended up taking fair while longer (which we’ll explain later).
2. When will fuel prices go up?
Prices will probably increase once the full fuel excise is reinstated.
But Treasurer Jim Chalmers says there are millions of litres of fuel already in the system, so prices should not go up immediately.
“Industry estimates that there [will] be more than 700 million litres of lower excise fuel in the system when the fuel excise is reintroduced,” Mr Chalmers said.
“This is 700 million reasons why the price should not shoot up by the full 23 cents on the night that the excise relief ends.”
Mark McKenzie, CEO of the Australasian Convenience and Petroleum Marketers Alliance, said there will be a lag of up to five days before the price increase flows through to the pump.
“What we’ll see is that service stations that are replacing their fuel on a daily basis will get the increase in costs flow straight through,” he said earlier this week.
Suppliers can set their own prices, but the cost of fuel at the bowser generally fluctuates in line with wholesale prices.
By the way, the fuel excise has increased by 25.3 cents a litre — up from the 22.1 cents — due to indexation and the GST.
3. Did the fuel excise cut work?
Yes. Kind of.
Although motorists could be forgiven for not feeling any relief.
That’s because the fuel excise cut in March came at a time when global oil prices were climbing rapidly, increasing by about 50 cents towards the end of June.
Australian Competition and Consumer Commission chair Gina Cass-Gottlieb said the excise cut did have an impact.
“The cut to the fuel excise has been passed on to Australian motorists in the vast majority of locations,” she said.
However, the ACCC reported that it took about six weeks for lower prices to be seen at bowser.
4. How much did it cost the government?
The cut cost about $5.6 billion in lost revenue, according to government estimates.
That’s with the tax halving for just six months.
But the change might cost us in other ways too.
The reintroduction of the fuel excise is expected to put upward pressure on inflation.
Treasury estimates that annual headline inflation is expected to increase by 0.25 per cent in the December quarter of this year.
This is all at a time when reserve bank has repeatedly increased interest rates in an attempt to rein in inflation.
5. Who’s keeping track of the prices?
The ACCC monitors fuel prices, and earlier this month it was ordered to increase its efforts ahead of the excise cut ending.
“We will shortly be engaging with fuel wholesalers and retailers to say that we do not expect to see uncharacteristic or abnormal wholesale and retail price increases in the days leading up to, and on the day of, or after, the reintroduction of the full rate of fuel excise,” Ms Cass-Gottlieb said at the time.
Again and again, fuel watchers, consumer advocates and economists have said the best way motorists can to put pressure on fuel retailers is to vote with their wallets and shop around for the cheapest fuel.
The ACCC also monitors petrol price cycles in the largest capital cities and publishes updates on its website.
It’s also worth mentioning that petrol price cycles are due to the pricing policies of petrol retailers and not from changes in the wholesale cost of fuel.
Extracted in full from: The fuel excise cut has ended. Here’s what that means for the price of fuel and whether you should fill up now – ABC News