Petrol prices are poised to climb above $2 a litre and diesel beyond $2.40 in the coming days, following the government's confirmation that the temporary fuel excise reduction will lapse this Sunday. The 16-cent per litre discount, which was halved from 32 cents in July, will revert to the full excise rate on 3 August, adding 16 cents to wholesale prices paid by service stations.
Government confirms end of excise relief
Energy minister Chris Bowen told reporters on Saturday that the government would not extend the cost-of-living measure. "Obviously we always monitor the situation and take steps as necessary, but our policy decision is clear," Bowen said. The decision ends a relief package introduced in March to cushion the impact of soaring fuel prices.
The increase will add approximately $8.80 to the cost of filling a typical 55-litre vehicle tank. Motorists are likely to see the full impact at the pump within days, as service stations adjust prices to reflect the higher wholesale costs.
Retail prices already climbing
Unleaded petrol prices have already risen to 205.6 cents per litre in Canberra, 204.4 cents in Darwin, and 200.5 cents in Hobart, according to MotorMouth data from Saturday. Across all capital cities, petrol now costs more than 190 cents a litre, meaning the full pass-through of the excise increase would push prices past 200 cents.
Diesel prices are also surging. Melbourne saw diesel at 242.7 cents per litre on Saturday, up 68 cents from its June low of 173.9 cents. Canberra was at 244.4 cents, Darwin at 244.1, and Hobart at 241.8. Diesel exceeds 235 cents in every capital except Perth, and could surpass 250 cents if retailers pass on the full increase.
Global factors drive up costs
The price spike is compounded by international tensions. The Strait of Hormuz has been nearly closed to traffic since Iran and the US resumed hostilities two weeks ago. Iran struck two tankers under US escort on Friday, escalating the conflict. Brent crude, the global benchmark, has jumped from about US$70 on 2 July to nearly US$90 on Saturday, increasing import costs for Australian fuel.
Analysts warn oil could return to US$100 a barrel if the conflict persists. In March, when oil hit that level and no excise relief was in place, petrol surpassed 250 cents a litre and diesel passed 300 cents.
Economic impact of the discount's end
Economists had credited the excise discount with helping to suppress inflation and support household spending. Shane Oliver, AMP's chief economist, said in a note on Saturday that the loss of the discount could push petrol prices to 210 cents a litre. "This will push up headline inflation again as well as the cost of the average household's weekly fuel bill by around $20," Oliver said.
Bowen defended the decision, warning against panic buying and urging motorists to purchase only what they need. "I think Australians have understood … this is a temporary measure," he said. He noted that Australia holds 43 days of petrol stocks, 39 days of diesel, and 34 days of jet fuel. As of Saturday, 44 fuel ships were en route to Australia, carrying 3.1 billion litres due for delivery in the coming month, consistent with previous weeks. Fuel orders are secured through October, with no cancellations during the crisis.
Retailers adjust to higher wholesale prices
Tom Woodlock, senior market analyst at Argus Media, explained that service stations typically take four or more days to adjust pump prices in response to excise or overseas pricing changes. Retailers have already begun passing on higher wholesale costs following the US strikes on Iran in mid-July, which pushed up oil and import prices.
The end of the excise discount marks a return to full fuel taxation, adding pressure to household budgets amid rising living costs. With global oil prices volatile and geopolitical risks elevated, motorists face a period of elevated fuel prices, with further increases possible if the conflict in the Middle East escalates.
