Faced with soaring inflation and rising interest rates, the average Australian is feeling the pinch. For motorists, that pinch is getting ever tighter, with the cost of fuel rising for the eighth consecutive quarter, according to the Australian Bureau of Statistics.
In the last quarter, ABS recorded the largest fuel price increases in Darwin (+6.2% from the previous quarter), followed by Canberra (+5.6%) and Adelaide (+4, 9%). Nationwide, motorists felt an average increase of 4.2%.
In dollars, according to the Australian Institute of Petroleum’s latest weekly petrol price report for the week ending October 2, the average cost of fuel at the pump was 183.2 cents per litre, while the average wholesale price was 157.3 cents per litre.
Comparatively, the same week last year – the week ending October 3, 2021 – the average retail price was 152.1 cents per liter while the wholesale price was 142.0 cents.
Why have gasoline prices increased?
The sharp rise in prices started in the second quarter of 2021, when there was a recovery in demand for crude oil, linked to a limited global supply. As the ACCC explains, Australian benchmark prices for gasoline and diesel are tied 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 changes in supply and demand factors. So when COVID-19 restrictions began to ease and global demand for crude oil increased due to greater mobility, the higher price of fuel in Australia was passed on to consumers.
But the price pressures on consumers didn’t stop there, the ABS explained in its latest Consumer Price Index report. Another spike in gasoline 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 50% fuel excise reduction to help counter rising costs. This reduction ended at the end of September with the return of excise duty on fuel to its full rate, forcing motorists to again pay more per ton.
What is excise duty on fuel?
Fuel is subject to GST and excise duty, a flat rate sales tax levied by the government on petrol and diesel purchased from the tanker which is indexed twice a year in accordance with the CPI. Generally, this indexing takes place in February and August of each year.
However, on March 29, 2022, the Australian government announced a 50% fuel excise duty reduction for six months, starting March 30. This reduction led to lower fuel prices in April, although price increases were again seen. in May and June due to aggravating international factors.
“A family with two cars that fills up once a week could save about $30 a week or about $700 over the next six months,” then-Treasurer Josh Frydenberg said during the announcement. of the reduction.
While arguably not a precise figure according to economists John Hawkins and Yogi Vidyattama, the savings have been widely welcomed by the Australian public and car commuters. On September 29, however, the fuel excise was reintroduced.
Due to the indexation that took place on August 1, 2022, this excise duty was increased to 25.3 cents per liter, compared to 22.1 cents before the cut.
Speaking to Forbes Advisor, an ACCC spokesperson explained that when the fuel excise was reduced at the end of March, the commission increased its volume of collecting and analyzing data on fuel prices. – and that the ACCC has continued this rhythm of monitoring since the reintroduction of the full rate.
“We have engaged with fuel wholesalers and retailers to explain our role and responsibilities in this area, seek information and outline our expectations with respect to both the impact of the excise duty increase and not misleading Australian consumers about the rationale for any price increases after the reintroduction. of the full rate of excise,” the spokesman said.
What can motorists do in the face of rising gas prices?
In its engagement with fuel wholesalers and retailers, the ACCC wrote a letter explaining that it did not expect to see “unusual or abnormal” prices in the days leading up to, the day or days after the reintroduction excise.
“[The ACCC] will not hesitate to take action if retailers make misleading statements about price movements or if there is evidence of anti-competitive behavior (such as price collusion),” Chief Executive Scott Gregson wrote.
And while such oversight should allay fears of unnecessary price hikes, motorists remain subject to paying the higher prices inflicted by global and domestic factors.
To combat costs, motorists are encouraged to keep tires inflated to their recommended PSI and turn off the air conditioning whenever possible, as both can weigh on fuel mileage. Motorists are also encouraged to consider their time on the road if possible and do their research on prices well before the tank runs low.
“Shopping and using fuel price apps can help consumers find the cheapest gasoline in their area,” the ACCC spokesperson said.
“Previous ACCC research has shown that buying from independent retailers and avoiding the top of the petrol price cycle in the five major capitals can save motorists a lot of money.”
The ACCC estimates that if all motorists took advantage of the “where” and “when” to buy gasoline, the total potential annual savings would be around $260 million in Sydney, $220 million in Melbourne, 105 million in Brisbane and $75 million in Adelaide.
Will prices continue to rise?
Following the re-establishment of the full excise duty on fuel, the price of petrol is expected to increase. While Treasurer Jim Chalmers said this increase won’t be felt immediately due to “700 liters of low excise fuel in the system”, the price hike is expected to be felt nationally in the weeks to come. come.
However, there are other factors at play that could cause the price of gasoline to fluctuate again. Ongoing fears of a global recession are driving the price of crude oil down, while escalating disputes in high-density oil producing areas could see the price rise again. Either way, the road ahead seems clouded by uncertainty.
Why did the fuel excise duty reduction end?
The reduction in excise duty on fuel was intended to help Australians cope with the rising cost of living. While it aimed to lower the price of gasoline at the pump for motorists, it didn’t quite work as expected: the price of gasoline still increased due to international factors and of indexing.
As the cut was only announced in the Morrison government’s budget for six months, it ended on September 29. It has been reported that the six-month measure has cost the government around $3 billion in lost revenue, which is why the new Labor government has said it will not extend the excise duty reduction further.
How are petrol prices in Australia compared to the United States?