Australians are being warned to brace for rising fuel costs in September and October as rising global oil prices trickle down to local petrol consumers and the government finalizes its temporary cut in excise duties on the fuel.
The end of the fuel excise tax rebate on September 30 will double the tax paid on gasoline to 44.2 cents per liter and increase local fuel costs at a time when rising global oil prices are already is making it more expensive for Australian motorists to fill their tanks. .
Industry data shows that national average prices hit a four-week high of 177.3 cents a liter last week, and that number is expected to rise further in the coming weeks.
“It is possible that we will see the reinstatement of excise taxes and higher oil prices, particularly if OPEC is aggressive in its [September] statement,” CommSec Senior Economist Ryan Felsman said.
“It could be a double whammy for households.”
Reinstating the fuel excise tax is almost guaranteed to result in higher gasoline prices, but NRMA spokesman Peter Khoury said retailers they should not go through any immediate increase.
“Gas stations will continue to have fuel in their tanks … which they bought in bulk at a reduced tax rate,” he said.
“Prices definitely shouldn’t go up right away.”
Mr. Khoury called on the consumer watchdog to monitor retailers to make sure they don’t rip off motorists, following earlier reports in the new daily which found that retailers did not pass on the full benefit of global oil price declines to motorists during fuel excise holidays.
‘Strange’ price cycle
Although average national gasoline prices rose last week, big capital markets like Sydney have exhibited strange behavior in recent months, Felsman said.
Gas prices in major East Coast markets generally rise and fall semi-regularly, but the latest cycle has been particularly long and shallow.
For example, average tanker prices in Sydney, Melbourne and Brisbane hit a low in early August before rising again, by about 20 cents a liter in each city, in mid-August.
From there, prices fell again, much sooner than they would in a typical market cycle, although the declines were smaller than the previous surge earlier in the month.
The good news, Felsman said, is that this suggests the discount part of the market cycle still has some time left and should support lower prices (at least in Sydney) over the next week.
That means many motorists still have time to refuel cheaply before the Bowser tables start rising again in September.
Khoury expects gas prices to start rising again in September before the fuel tax is reinstated at the end of the month.
“We will start to see prices go back up, but it won’t happen overnight,” Khoury said.
Oil outlook sour
The Albanian government has ruled out extending the fuel consumption tax cut beyond September 30, saying the budget cannot afford the cost of further relief for households.
It means that prices will progressively increase in October by around 22.1 cents per litre, although this process is expected to take a few weeks to unfold.
Worryingly, these increases seem increasingly likely to come in the context of higher world oil prices, which will worsen the pressure on household budgets.
After falling in late July and early August, Brent crude prices rose 4.4% to $100.90 ($143) a barrel last week, as fears that OPEC+ would cut oil production oil outweighed fears about the economic slowdown.
Felsman said there is a “tug of war” in the oil market right now as inflation fears put downward pressure on prices while supply prospects worsen, pushing prices higher.
“A lot of focus right now is on the potential for supply disruptions in Libya. [and] talk about OPEC potentially cutting production at its next meeting,” he said.
Despite a recent visit by US President Joe Biden, which was designed to convince Saudi Arabia to pump more oil, the Gulf nation has signaled it could push for a production cut at OPEC’s next meeting in September.
If that happens, it will support higher oil prices that would flow to Australian tankers at the same time the fuel excise tax cut expires.