Fuel excise reduction ends tonight, prices to increase by 25 cents a litre

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Retirees Ken and Glenys Whalley have been caravanning for the past 10 weeks and watching fuel prices closely.

“It’s a very hot topic in caravan parks,” Glenys said.

“We carry jerry cans now and if we know there’s going to be a place 50 kilometres down the track with cheaper fuel, we fill up the jerry cans when we get there.”

The Adelaide retirees set aside a budget of $10,000 for this trip and fuel has eaten up $4,500 of that — almost half.

“It’s been a bit of a shock to us with the lifestyle we’ve set up using the caravan and hoping to travel as much as possible around Australia,” Ken said.

“We weren’t figuring on the sort of outlay that’s confronted us this year.”

It means future trips will have to be closer to home.

Fuel prices set to rise as the excise reduction ends

The fuel excise reduction, which was introduced in the Morrison government’s final budget in March, will end at midnight tonight.

It will see the tax on fuel increase by 25.3 cents per litre, according to the competition regulator, the ACCC.

The wholesale and service station industry body chief executive Mark McKenzie said there will be a lag of up to five days before the price increase flows through to the pump.

“What we’ll see is that service stations that are replacing their fuel on a daily basis will get the increase in costs flow straight through,” he said.

“But we do have a lot of service stations that get deliveries on a once-weekly or twice-weekly basis, so therefore what they’ll probably do is hold out as long as they can to remain competitive.”

The competition watchdog, the ACCC, says it will be monitoring wholesale and retail fuel prices closely.

Average national weekly petrol pump prices have already come down from their July peak of $2.12 a litre, this week sitting at $1.74.

However, prices do vary significantly depending on location, with Melbourne, Sydney, Brisbane, Adelaide and Perth subject to a discount price cycle.

“We can see the price at the top of the cycle down to the bottom of the cycle vary by about 40 cents,” Mr McKenzie said.

The smaller capitals of Canberra, Hobart and Darwin (and many regional areas) don’t have the same intensity of competition and don’t follow price cycles.

Expect prices to rise even more towards Christmas

When it comes to oil, there are two contradictory forces at play, according to Commonwealth Bank’s oil analyst Vivek Dhar.

“We see central banks around the world hiking up rates in order to tame inflation and also we’re seeing the US dollar surge,” Mr Dhar said.

“The other consideration is you’re seeing the Aussie dollar weaken as the US dollar strengthens. That’s actually bad for consumers. It means you’re probably paying a higher price for petrol than you would have otherwise.”

The European Union has imposed a partial ban on seaborne Russian oil from December 5th and petroleum products from February 5th 2023.

And that will mean higher prices in coming months.

“We think this force will be stronger than the fall in demand,” Mr Dhar said.

“We’ll probably see prices rebound in oil by the end of this year. That will likely reflect in petrol and moreso in diesel come early next year when that EU embargo hits refined products,” he said.

That is not good news for small business owners Bethlea and John Bell, who run a cattle farm and mowing business in Rockhampton, Queensland.

Fuel now makes up about 12 per cent of their input costs.

“For our mowing clients, we try not to increase prices even though our costs are rising,” Ms Bell said.

“We also have a woody weed issue on our farm and diesel is used for the treatment of that. So we’ve noticed a dramatic increase in our use of diesel.”

Diesel now has an entrenched premium

The demand for diesel remains high, as the European Union faces a gas crisis and industries switch to diesel.

“If you look at where wholesale diesel prices in Australia are, they are at roughly a 25-per-cent premium to where they were at the beginning of the year,” Mr Dhar said.

Fuel costs for Melbourne-based removalist company Man with a Van have already increased by 50 per cent this year.

It has been another blow after a difficult few years due to COVID-19.

“So with that and rising interest rates and the fuel excise no longer being taken care of by the government we are in a really financially precarious position, the toughest moment for us since we started about 20 years ago,” director Tim Bishop said.

The company can’t reduce its fuel usage and can’t absorb the increase in costs.

“We’ve put up our prices, unfortunately, three times in the last financial year,” he said.

“Every extra cost has to be passed on to customers, because we’re already running on the smell of an oily rag as a company.”

By business reporter Emily Stewart (Original ABC Article)