Fuel prices could hit new record highs after Korean refinery explosion

Australian fuel prices are again starting to climb, with fears of more record highs at the bowser arising just weeks after the national fuel excise was cut.

After hitting an average peak of 212.5 cents per litre (cpl) on March 20, the previous Federal Government announced it would temporarily halve the national fuel excise from 44.2cpl to 22.1cpl as a part of its 2022-23 Budget on March 28.

Although prices dropped to a low of 166.3cpl on April 17 – the lowest since the beginning of the year – the figure has continued to climb back up, now sitting at 185cpl according to the Australian Institute of Petroleum.

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While the record-high prices at fuel stations across the country coincided with Brent Crude oil hitting all-time highs of US$127.98 a barrel, recent dips in the price of oil have proven to be temporary – with it bouncing back to just over US$113 at the time of writing.

The latest increase in fuel prices is understood to have been exacerbated by an explosion at the S-Oil refinery in Korea last week, with the Korea Herald reporting one worker died and eight more were injured in the blast.

As reported by OilPrice.com, the facility usually has a daily output of 580,000 barrels per day, placing further strain on the wider industry to fill the hole left as production pauses to investigate the incident.

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The Australian Competition and Consumer Commission (ACCC) previously said it would monitor local fuel prices more closely in the wake of the excise cut, with the consumer watchdog looking to ensure fuel companies weren't pocketing the difference and making false or misleading statements about their intentions to hand down the tax cut to consumers.

Going off current prices, the cost of fuel per litre is sitting at 1.16 per cent of the cost of a barrel of oil, while at its peak it was roughly 1.18 per cent. However, had the excise not been halved in March the amount we could have been facing at the pumps now would have equated to around 1.3 per cent of an oil barrel's price.

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Given this disparity, it's clear more than just the cost of oil is contributing to a bigger hit to the hip pocket at the bowser, although groups like the Royal Automotive Club of Queensland believe the weakening Australian dollar is also a contributing factor.

“This early price hike is definitely a surprise, as we had only just entered the cheap phase of the current price cycle, which is now only set to last a matter of days,” said RACQ spokesperson Nicky Haydon regarding recent increases in Greater Brisbane.

“Unfortunately, the fuel excise cut will not have an impact on global oil prices, so motorists need to be savvy about where they buy their fuel."

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While the fuel excise in its entirety is understood to bring in close to $12 billion for the Government annually, calls throughout the industry to scrap it permanently and replace it with a road user charge have been growing louder.

“State and territory governments are beginning to adapt to the changing nature of mobility in Australia, including the rise of electric vehicles that do not pay fuel excise. Applying this more broadly and scrapping taxes like fuel excise and the Luxury Car Tax will ensure that all motorists are paying an equitable amount to use Australia’s road network,” Federal Chamber for Automotive Industries' Chief Executive Tony Weber has previously said.

“Our view is that governments can take this further and apply a road user charge to all vehicles, regardless of their engine type."

The newly-elected Labor Government will have until midnight on September 28 to determine whether it keeps the fuel excise in its half-strength state, reinstate it to 44.2cpl or scrap it entirely and look for another way to raise the lost revenue.