Government

Full fuel excise returns, adding to rising household costs

A service station at sunset

Nicola Dowse

Posted September 28, 2022

Filling up your vehicle is about to get more expensive as the six-month fuel excise discount expires at a time with global supply issues. Here’s what you need to know to ease the pain at the pump. 

Petrol prices are set to increase significantly with the return of Australia’s full rate of fuel excise.

As part of the 2022 Federal Budget, the fuel excise was halved from 44.2 cents per litre down to 22.1 cents per litre for six months from March 29.

That discount is set to expire, with the full excise returning on September 29. From this date, the full fuel tax will be reinstated, adding an extra 25.3 cents per litre (including GST) to the amount of tax paid on fuel.

The Australian Competition and Consumer Commission (ACCC) reports that “wholesalers are expected to pass on this increase in full, from this date”, with the consumer watchdog expected to monitor prices to ensure fair trade. 

“We will shortly be engaging with fuel wholesalers and retailers to say that we do not expect to see uncharacteristic or abnormal wholesale and retail price increases in the days leading up to, and on the day of, or after, the reintroduction of the full rate of fuel excise,” said ACCC Chair, Gina Cass-Gottlieb.

A poll conducted by the Australian Automobile Association (AAA) of 1,190 Australians found that 67 per cent want 100 per cent of funds raised from the excise put back into road and transport infrastructure. The poll also revealed the main concern for 53 percent of respondents was the overall cost of living.

"High fuel costs continue to be a major concern for Australian motorists, who clearly expect the taxes they pay at the bowser to be spent on making their transport network safer and more effective," said AAA Managing Director, Michael Bradley.

"It is clear that a strong majority of motorists oppose a 25 cent per litre increase in fuel excise, but motorists are more accepting of this tax if they see it being spent on the roads and transport infrastructure their communities need."

A close-up of a petrol bowser showing the prices

Australian fuel prices are at a 14-year high and are likely to jump even further when the full fuel excise is reinstated. Image: Getty.

How are Australian fuel prices set and what is the fuel excise? 

The amount you pay for petrol or diesel fuel is determined by multiple factors, including:   

  • Product costs: the cost to create and distribute the product 

  • Taxes: collected by the Federal government, including GST and the fuel excise 

  • Retail costs: what the service station adds on to account for operating costs and profit   

The fuel excise is a flat tax applied to petrol and diesel fuel sold at petrol stations throughout Australia. It’s a Federal Government tax, with revenue raised by the excise intended primarily to fund services and infrastructure across the country, including transport infrastructure.  

Retail fuel prices (the amount you pay at the bowser), are at a 14 year-high according to the ACCC June quarter report, despite the excise being halved. 

For the week ending September 11, the average price of petrol in Victoria was 162 cents per litre, with Victorians in metropolitan regions paying slightly less on average (160.6 cents) compared to regional residents (166.1 cents).  

For comparison, the average petrol price for the 2021 September quarter in Melbourne was 155.2 cents per litre, while in the June 2021 quarter it was 144.5.  

How expensive is Australian fuel? 

With prices on the rise, you might be surprised to hear that in a global context, Australian prices are relatively low.  

According to the Australian Institute of Petroleum, Australia had the sixth cheapest petrol and diesel prices compared to the other 33 OECD countries during the March 2022 quarter. The Netherlands has the most expensive fuel while the United States has the cheapest.  

It’s worth noting that the cost of fuel itself between Australia, the Netherlands and the US are similar, with fuel taxation in each country the determining factor in the total cost to consumers.

 

A person inflating a car tyre

Keeping your tyres inflated is one easy way to minimise your fuel usage, along with keeping you car well maintained.

The fuel cycle and when fuel prices are expected to rise 

Along with global factors (both natural and man-made) and taxes, competition between retailers is a factor in determining the fuel prices you pay. 

When one fuel retail chain decides to drop their prices, this can cause competing retailers to follow suit - matching the price or even undercutting it. This cycle continues until it’s no longer profitable for businesses, at which stage the prices can reset – that is, they go back up.  

You’re not imagining it either when fuel prices tend to rise around holiday periods, as retailers respond to supply and demand for fuel at these peak times.  

How to save money on fuel 

Along with keeping an eye on the arevo fuel finder, there are several ways your can minimise the cost of fuel for your vehicle.  

Maintain your car 

Getting your car serviced on schedule can ensure the engine is running as efficiently as possible. Even simple tricks like making sure your tyres are adequately inflated can reduce the amount of fuel used. 

Shop around 

Using a fuel tracker app like arevo fuel finder can help you find the best-priced fuel in your area. Prices are updated regularly by service stations so you can make informed decisions.  

Lighten the load 

Take out any excess weight in your boot – don’t drive around with luggage you don’t need for that specific journey. If you have a roof rack, remove it when not in use as it can create drag and make your engine work harder.  

Be consistent 

High speeds, harsh braking and quick acceleration can expend more fuel. Keeping a consistent, safe speed will use less fuel – if your car has the feature, using cruise control on highways is another way to lessen fuel usage.  

Buy the right type 

Not buying the right type of fuel for your car can cost you more than you might think. Car engines are developed to run on a specific fuel-type. Make sure you know which one your car needs to operate most efficiently.  

Get a better deal at the bowser 
The arevo fuel finder app has petrol prices in real time →