Fuel prices to spike again – but not for everyone

Heavy vehicle operators and some businesses are expected to be delivered a small silver lining when the federal government restores the full 44 cents per litre fuel excise in late September, as prices look set to hold steady above $2 per litre.

The current temporary six-month cut of 22cpl introduced by the previous Morrison government (with bipartisan support) runs out on September 28 and the Labor government has already announced it has no plans to extend the measure.

When the temporary cut was introduced in March, the government quietly took away a Fuel Tax Credit available to transport and heavy machine operators – to the order of 17.9cpl for the former rebated back to businesses at the end of each quarter.

In good news for heavy industries and businesses who use fuel to power vehicles not used on public roads, the national fuel retailer body is confident that fuel tax credits scheme will be restored from September 29.

“Prior to the cut, the government collected 44 cents per litre of fuel sold, regardless of the price,” explained Australasian Convenience and Petroleum Marketers Association (ACPMA) chief executive Mark McKenzie.

“In the heavy vehicle industry, they were getting just under 18 cents a litre refunded. So their net excise was 26 cents per litre.

“When the 22 cent reduction came into play, the fuel tax credit was temporarily paused and trucking operators got the least benefit – effectively a four cent per litre saving.

“But when the excise is increased back to 44 cents per litre, it is expected that we’ll go back to the previous fuel tax credit scheme for eligible operators and businesses.”

For everyone else, the end of the fuel excise relief spells higher prices at the bowser, as fuel companies including Shell deliver record profits despite falling crude oil prices.

McKenzie expects petrol and diesel prices to hold steady above $2 per litre for the foreseeable future, as a result of the poor Australian-US dollar exchange rate and the ongoing conflict in Ukraine, plus myriad other factors.

“We’ve seen the oil price fall by 22 per dollars per barrel since mid-June [to as low as $US104 per barrel]. That’s starting to flow into the wholesale prices, we’ve seen a 14c per litre fall in petrol and diesel,” he said.

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“I have to be a bit careful because what we’ve seen in recent days is the oil price go up again. While this has provided a chance for us to take a breath, it depends on what happens next.”

The national average price of 95RON unleaded had dropped to $2.20 per litre at the time of reporting, marking a fourth consecutive daily decrease.

McKenzie conceded the impending increase in fuel excise will negatively impact motorists, but should be gradually phased in by retailers.

“In any point in time, we have about 700 million litres of fuel that has flowed past the excise point. It took five to seven days for the decrease in excise to take effect at the bowser,” he explained.

“Different fuel retailers will therefore pursue different strategies in terms of their pricing and when the full excise takes effect.”

McKenzie said there were two schools of thought regarding the long-term price of petrol and diesel – both in Australia and abroad.

He also noted the volatility of the market meant the peaks and troughs of the current price cycle would continue – albeit in smaller fluctuations.

“Oil is traded in the same way as shares are traded. It is bought and sold, so oil market traders are split on what will happen towards the end of the year,” he said.

“The first group is saying that supply will tighten and that will push the price up as much as 15 per cent.

“The other half of the traders predict much of the advanced economy may go into a recession, and while that isn’t a particularly good thing, it could ensure the same supply but a fall in fuel demand, which could deliver up to a 25 per cent fall in prices between now and December 31.”

While mum and dad motorists have little option but to weather the fuel price storm, they are being urged to make the most of available pricing apps where possible.

“The key thing for everyone at the moment is that the market is volatile and fuel retailers are pursuing different strategies with how they price their fuel,” McKenzie explained.

“The best advice is use the pricing apps. If you’ve never used them before, they’re a great way to ensure you’re getting the best value.”