Faced with persistent inflation and high interest rates, the average Australian is feeling the pinch. For motorists, that pinch is unrelenting, with the cost of fuel rising to new highs by the end of April, as high crude oil prices and a weak Aussie dollar create the perfect storm at the bowser.

According to data from the Australian Institute of Petroleum’s latest Weekly Petrol Prices Report, the average price of 91 octane unleaded rose to 217.92 cents-per-litre in Sydney, Adelaide, Brisbane, Melbourne and Perth for the week ending April 27, 2024. This broke the previous fresh high of 217 cents-per-litre, late last year.

To put this into context: around 18 months ago, the price of standard 91 octane unleaded petrol was 183.2 cents-a-litre, while the average wholesale price was 157.3 cents-a-litre. That may seem cheap in hindsight but it was considered expensive at the time—unleaded petrol costs a mere 152.1 cents per litre, on average, in October, 2021.

Let’s take a look at why petrol prices are so high, whether they will continue to rise, and ways motorists can save money when filling up.

Why Have Petrol Prices Increased?

The major hike in prices began in the second quarter of 2021, when there was a recovery in the demand for crude oil, linked with a limited global supply. As the ACCC explained at the time,  Australia’s benchmark prices for petrol and diesel are linked to crude oil prices, since crude oil is a major production input.

Crude oil is an internationally traded commodity, and its price is determined by changing supply and demand factors. So when Covid-19 restrictions began easing and global demand for crude oil increased due to higher mobility, the more costly price of fuel in Australia was passed onto consumers.

But the price pressures flowing through to consumers didn’t end there, the ABS explained in its 2022 consumer price index report. Another hike to petrol prices occurred due to Russia’s invasion of Ukraine, which caused an oil price shock felt around the world.

In March 2022, the federal government introduced a temporary cut to the fuel excise by 50% to help counter the growing cost. This cut ended in late September of 2022 with the fuel excise returning to its full rate, causing motorists to once again pay more at the bowser.

Prices have trended upwards since then, although there have periodic dips and reprieves. However, by September last year, the daily average across Australia was at a new average of 216.87 cents-per-litre, and the outbreak of war in the Middle East has further fuelled the increase cost of crude oil. It is thought that the jump in the price of oil and our weak dollar—which is trading around US 66 cents as of May—is responsible for the most recent price spike.

What Happened to the Fuel Excise Cut?

Fuel is subject to GST and excise duty, a flat sales tax levied by the government on petrol and diesel bought at the bowser which is indexed twice a year in line with the CPI. Generally, this indexation occurs in February and August each year.

However, on March 29, 2022, the Australian Government announced a 50% cut in the fuel excise for six months, which took place from March 30. This cut resulted in a fall in fuel prices in April, although price rises were seen once again in May and June due to compounding international factors.

“An Australian household with at least one vehicle will receive an average benefit of around $300 over a six-month period,” the federal government stated at the time.

The savings were largely welcomed by the Australian public and car commuters. On September 29, however, the full fuel excise was reintroduced. Due to the indexation that occurred on August 1, 2022, that excise was increased to 25.3 cents-a-litre–up from the 22.1 cents it was sitting at pre-cut.

Speaking to Forbes Advisor at the time, an ACCC spokesperson explained that when the fuel excise was cut in late March of 2022, the commission increased its volume of fuel price data collection and analysis–and that the ACCC has continued this rate of monitoring since the full rate was reintroduced.

“We have engaged with fuel wholesalers and retailers to explain our role and responsibilities in this area, seek information, and outline our expectations in relation to both passing on the excise increase and not misleading Australian consumers about the rationale for any price rises following the reintroduction of the full rate of the excise,” the spokesperson said.

What Can Motorists Do About Petrol Prices?

In its engagement with fuel wholesalers and retailers, the ACCC wrote a letter explaining that it did not expect to see “uncharacteristic or abnormal” prices in the days leading up to, on the day of, or the days after the reintroduction of the excise.

“[The ACCC] will not hesitate to take action if retailers make misleading statements on price movements or if there is evidence of anti-competitive behaviour (such as price collusion),” chief executive Scott Gregson wrote.

And while such monitoring should ease fears of unnecessary price gouging—and many experts argue that petrol stations are simply passing on costs—the reality is that petrol remains a significant price burden. Since the fuel excise cut ended, the Australian dollar has failed to gain ground against the Greenback and the Middle East conflict is driving up crude oil prices.

Furthermore, as the ACCC points out, the price of fuel in Perth, Melbourne, Sydney, Adelaide and Brisbane, move through peaks and troughs, in what is known as a price cycle. (Price cycles do not occur in Canberra, Hobart and Darwin).

So how can motorists save money?

For starters, motorists are encouraged to keep tyres inflated at their recommended PSI and turn off the air-conditioning whenever possible, as both can chew into fuel consumption. Motorists are also encouraged to consider the amount of time they spend on the road if possible, and do their research on prices well before the tank runs low.

“Shopping around and using fuel price apps can help consumers find the cheapest petrol in their area,” the ACCC spokesperson said.

“Previous ACCC research has shown that buying at independent retailers and avoiding the top of the petrol price cycle in the five largest capital cities can save motorists a lot of money.”

If you’re in one of the five cities where price cycles occur, you may wish to try Petrol Spy, which logs petrol prices in your area for quick comparison, or Fuel Price Australia, which offers near real-time monitoring of fuel movements. You can then time your trip to the petrol station to coincide with a drop in the cycle. You can also check out the ACCC’s dedicated price cycling page, which indicates when they think petrols prices are decreasing, have hit as low as they will go (and, therefore, a great time to fill up) or if they’re heading in the opposite direction.

The ACCC estimates that if all motorists took advantage of the ‘where’ and ‘when’ to buy petrol, total potential yearly savings would be around $260 million in Sydney, $220 million in Melbourne, $105 million in Brisbane and $75 million in Adelaide.

Will Prices Keep Rising?

Following the reinstatement of the full fuel excise, the price of petrol did rise as expected and motorists have been left to absorb the cost of higher retail prices.

According to the ACCC, the price of petrol is largely influenced by two factors:

  • global events, such as Russia’s invasion of Ukraine and the conflict in the Middle East, which influence international crude oil and refined fuel prices
  • the value of the Australian-US dollar exchange rate.

With pressure being felt across both areas, it is unlikely that Australian motorists will see a steep drop in fuel prices anytime soon. However, this doesn’t mean that there won’t be dips and periods of relief in the near-term. In the ACCC’s briefing on petrol prices, it has predicted that petrol prices are decreasing in Sydney, Melbourne and Brisbane (and may decrease further), and have likely hit their lowest point in Adelaide and Perth.

Frequently Asked Questions (FAQs)

Why did the fuel excise cut end?

The fuel excise cut was introduced to help Australians with the rising cost of living. While it was aimed at lowering the cost of petrol at the pump for motorists, it didn’t work quite as planned: the cost of petrol still rose due to international factors and indexation.

As the cut was only announced in the Morrison government’s budget for six months, it came to an end on September 29. It’s reported that the six-month measure cost the government around $3 billion in lost revenue, which is why the incoming Labor government ruled out extending the excise cut.

What are the petrol prices in Australia vs US?

Data from the Australian Institute of Petroleum show that Australia has among the lowest petrol and diesel prices of all OECD countries on both a pre-tax and post-tax basis. Out of the 31 countries, Australia is ranked 29th as of the September quarter for 2023.

The United States is ranked the cheapest, while Denmark was the highest once the tax component was taken into account.

What is the fuel price in Australia?

As of May, 2024, the average price of Unleaded 91 fuel was 1.93 cents-per-litre.

Extracted in full from:  https://www.forbes.com/advisor/au/personal-finance/why-are-petrol-prices-so-high/