Fuel Prices in Australia Drop Back to Pre-War Levels

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Australian fuel prices have dropped back to pre-war levels, a welcome relief for motorists who have been grappling with steep hikes in global oil costs. According to new price data, average unleaded petrol prices in Sydney and Melbourne have slid below $1.56 a litre, while diesel has dropped under $1.78 a litre. This marks the cheapest fuel has been since late February, when Iran started blocking crude oil tankers from exiting the Persian Gulf, causing huge increases in the cost of fuel and triggering a global energy crisis.

But as continued hostilities threaten to undermine negotiations to end the war, experts warn that prices may not stay this low. From Wednesday, motorists will face an immediate 16¢-a-litre hike when the Albanese government reintroduces the fuel excise at a half rate. Global oil markets remain on edge following flare-ups in hostilities in the Middle East, which could send prices higher yet again.

Despite the addition of another 16¢ a litre on Wednesday, fuel would remain at “relatively affordable” levels below $1.70 a litre for unleaded and below $2 for diesel, said Peter Khoury, a spokesman for the National Roads and Motorists Association. “Those prices are not levels where it gets too much and people start to change their behaviour,” he said. “We are in a better place than we were.”

However, experts say that second-round inflationary impacts – the delayed consequences of higher petrol and diesel prices – had started showing up in elevated food and agricultural costs, and the cost of oil derivatives, such as plastic packaging. “From an inflation perspective, we are now starting to see the secondary effects coming through, reflecting higher input costs of a couple of months ago,” said Brendan Rynne, chief economist at KPMG.

Tapis crude, the primary oil benchmark used in the Asia-Pacific, has fallen more than 20 per cent in the past two weeks alone and is now trading at $US76 a barrel – nearly the same as it was in February before the war began.

A critical economic buffer for Australia, the steep falls in petrol and diesel prices have softened the blow of the government’s partial fuel-excise reinstatement. Continued falls in Asian oil and refined fuel benchmarks that directly influence local fuel costs are also raising the chance of deeper price cuts to come.

Australia’s fuel prices are back to levels not seen since before the Iran war began four months ago, delivering much-needed relief to motorists. New price data reveals that average unleaded petrol prices in Sydney and Melbourne have slid below $1.56 a litre, while diesel has dropped under $1.78 a litre.

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“Those prices are not levels where it gets too much and people start to change their behaviour,” said Peter Khoury, a spokesman for the National Roads and Motorists Association.