Australia's Fuel Excise Cut to End June 30, Price Hikes Expected

Australians are bracing for a potential increase in fuel prices as the government's temporary cut to the fuel excise is scheduled to expire on June 30. This measure, which reduced the price of petrol and diesel by 26.3 cents per liter, was introduced to mitigate the impact of soaring oil prices exacerbated by the conflict in the Middle East and subsequent shipping disruptions.

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We're not anticipating extending [the excise cut] but we'll keep it under review from week to week.

The federal government, through Treasurer Jim Chalmers, has indicated no plans to extend the excise cut, despite its role in temporarily lowering inflation. Chalmers stated that while the situation is under weekly review, an extension is not anticipated. This decision comes as uncertainty over future fuel supplies remains high due to the ongoing conflict and the lack of a clear resolution for shipping through the Strait of Hormuz.

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We shouldn't see a large jump in price but there will be a small one. This depends really heavily on the conflict and if they open the Strait of Hormuz, that will send a positive signal to the market.

Experts suggest that while a dramatic price surge is unlikely, consumers can expect a modest increase at the pump. Mahdi Abolghasemi, a supply chain expert at Queensland University of Technology, noted that the extent of the price rise will heavily depend on the conflict's trajectory and whether the Strait of Hormuz reopens, which would send a positive market signal. Professor John Quiggin from the University of Queensland added that even with the excise returning to its standard rate, petrol prices may not significantly exceed historical inflation-adjusted levels.

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Even with the return to higher excise, the retail cost of petrol won't be way out of line with historical levels, at least in inflation-adjusted terms. If some kind of peace agreement is reached in Iran, oil prices will probably fall. A renewed outbreak of major fighting is the main risk here.

Quiggin also argued against extending the excise cut, emphasizing the need to transition away from internal combustion engine vehicles. He believes temporary relief was justified, but three months should be sufficient for consumers to adjust. The Australian government's National Fuel Security Plan website outlines various fuel-saving measures.

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It's a bad idea in general to permanently shield consumers from price increases, bad more specifically because we need to transition away from internal combustion engine vehicles. Temporary relief made sense, but three months is time to adjust.