The fuel excise is back, how expensive is petrol going to get?

The ACCC will be paying close attention to price gouging by major fuel retailers and will “take action” if needed.

The federal fuel excise will come back in full force from tomorrow, but how will this affect prices at the pump?

To take a simple view, fuel prices will climb universally by 23.9 cents (higher than the 44.2 cents before – as fuel excise is indexed to CPI) as the clock passes midnight, but the equation is unlikely to be quite that simple.

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The 46 cents charged on every litre of fuel is a flat tax that forms part of prices. It’s set by the Federal Government and is paid into the Federal Budget.

Above the excise there’s the cost of the raw oil, processing and – crucially at the moment – transport. Though retailers still have the final say when it comes to prices.

This was one concern voiced by the Australian Automobile Association (AAA) when the drop in the fuel excise was enacted by former treasurer Josh Frydenberg in March 2022.

The AAA suggested fuel retailers may not pass the savings on to customers, rather line their pockets with extra earnings. So what’s going to happen next?

How much more will fuel cost?

This is immensely difficult to predict in the current climate. The price of a barrel of crude oil is trending down, yet fuel prices in Australia continue to fluctuate with little warning.

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Data from the Australian Institute of Petroleum (AIP) shows that, while a litre of unleaded was six per cent more expensive last week than the week before for retail buyers ($1.635 vs $1.739), the wholesale price actually dropped ($1.523 vs $1.505).

This suggests that retailers could be easing the transition back to the higher federal fuel excise due to hit on Wednesday, though wholesale pricing data has more lag than retail so it’s not a precise calculation.

We can be pretty certain that the price of fuel will continue to rise, potentially returning to – or likely breaking – its March peak of $2.10-2.20/litre for 91 octane in Australia.

But the Australian Competition and Consumer Commission (ACCC) did provide some solace for consumers in a letter distributed to major fuel retailers last week.

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The ACCC said it doesn’t expect “uncharacteristic or abnormal retail price increases in the days leading up to, on the day of, or after the reintroduction of the full rate of fuel excise”.

The consumer watchdog will be paying close attention to price gouging by major fuel retailers and said it will “take action” if needed.

Why was the federal fuel excise cut?

The fuel excise was cut to ease cost-of-living pressures that were skyrocketing amid Russia’s invasion of Ukraine.

Fuel prices peaked in March, shortly before the excise was halved. The cut was pencilled to last six months, with an end date of September 28.

Initially it worked, with the retail price of a litre of unleaded petrol falling sharply in mid-April. Through May and June 2022 petrol prices spiked again before dropping in August. Of late, however, retail prices appear to be on the rise again.