The Times Australia
The Times World News

.

What now for petrol prices? Global doom and gloom makes the outlook surprisingly positive

  • Written by Joaquin Vespignani, Associate professor, University of Tasmania
What now for petrol prices? Global doom and gloom makes the outlook surprisingly positive

In early March Russia’s invasion of Ukraine pushed global oil prices up by about 30% and Australians faced paying more than $2.15 a litre for petrol. Contrary to economists’ advice[1], the Morrison government decided to halve of the fuel excise for six months, reducing the cost of petrol by 22.1 cents a litre.

That discount period ends at midnight. So what can you expect local fuel prices to do now?

To begin with, the fuel excise is indexed[2] so it will add 23 cents to a litre of petrol. But not immediately. Your local service station’s tanks are likely to still hold fuel for which the retailer paid the discounted excise.

Federal treasurer Jim Chalmers has cited industry estimates[3] of about 700 million litres of discounted fuel still being “in the system”. To put that in perspective, Australians consumed an average of about 42.5 million litres[4] of petrol a day in 2021. So it may be one to two weeks, depending on where you live, before you’re paying extra.

But what you will then be paying probably won’t be that different to before Russia invaded Ukraine, with global oil prices dropping due to efforts to increase supply and a deteriorating global economic outlook suppressing demand.

Read more: What is petrol excise, and why does Australia have it anyway?[5]

Global prices dictate local prices

Australia imports about 90% of its refined fuel needs[6], so the main determinants of the price of petrol and diesel in Australia are international oil prices and the value of Australian dollar to the US dollar (because oil prices are determined in US currency).

Read more: Conflict in the South China Sea threatens 90% of Australia's fuel imports: study[7]

Over the past six months the Australian dollar’s buying power has declined from about 75 to 65 US cents (a 13% drop). But that has been offset by oil prices falling more than 30% since June.

There is no single oil price because oil is traded in different markets according to its quality (with names reflecting the historical source of that type of oil). The following graph shows two commonly cited benchmarks – West Texas Intermediate (from Texas) and Brent Crude (from the North Sea).

Prices spiked after the invasion of Ukraine due to Russia’s signicance as an oil exporter (the second-biggest after Saudi Arabia, accounting for about 8% of exports in 2021[8]) and uncertainty about what the conflict would mean for those exports, as well as Russia’s gas exports to Europe and markets generally.

Increased supply, faltering demand

The steady decline since June is due to two main reasons.

First, the efforts of the European Union and the United States to increase non-Russian oil supplies. This has been both to ease inflationary pressures on their own economies as well as to drive down the windfall revenue Russia has made from its oil exports (mostly to China and India[9]).

The G7 is working on a plan to further choke off those revenues through imposing a price cap[10] on Russian oil exports. Whether this will succeed depends first on finding agreement in Europe[11], which is divided over the plan.

The Australian government is supporting the price cap[12] but this is mostly symbolic. At this point I can’t see it having much practical impact on Australian petrol prices.

Second, the global economy is weakening, which is taking the pressure off demand. The OECD’s economic outlook published this month predicts global economic growth will slow to 2.2% in 2023[13].

As a consequence, the International Energy Agency’s Oil Market Report[14] last month revised upwards its outlook for world oil supply (though it also warned “another price rally cannot be excluded” given disruption risks).

Crude oil prices are now below US$90 a barrel – less than at the start of Russia’s invasion of Ukraine. For the next 12 months oil prices can be expected to decline to below US$80. This will put Australian petrol and diesel prices back to where they were in 2021. Which is good news for motorists, if not the global economy.

References

  1. ^ economists’ advice (theconversation.com)
  2. ^ fuel excise is indexed (www.ato.gov.au)
  3. ^ cited industry estimates (www.abc.net.au)
  4. ^ 42.5 million litres (www.energy.gov.au)
  5. ^ What is petrol excise, and why does Australia have it anyway? (theconversation.com)
  6. ^ 90% of its refined fuel needs (theconversation.com)
  7. ^ Conflict in the South China Sea threatens 90% of Australia's fuel imports: study (theconversation.com)
  8. ^ 8% of exports in 2021 (www.worldstopexports.com)
  9. ^ China and India (oilprice.com)
  10. ^ a price cap (www.brookings.edu)
  11. ^ agreement in Europe (www.bloomberg.com)
  12. ^ supporting the price cap (indaily.com.au)
  13. ^ 2.2% in 2023 (www.oecd.org)
  14. ^ Oil Market Report (www.iea.org)

Read more https://theconversation.com/what-now-for-petrol-prices-global-doom-and-gloom-makes-the-outlook-surprisingly-positive-191081

Times Magazine

DIY Is In: How Aussie Parents Are Redefining Birthday Parties

When planning his daughter’s birthday, Rich opted for a DIY approach, inspired by her love for drawing maps and giving clues. Their weekend tradition of hiding treats at home sparked the idea, and with a pirate ship playground already chosen as t...

When Touchscreens Turn Temperamental: What to Do Before You Panic

When your touchscreen starts acting up, ignoring taps, registering phantom touches, or freezing entirely, it can feel like your entire setup is falling apart. Before you rush to replace the device, it’s worth taking a deep breath and exploring what c...

Why Social Media Marketing Matters for Businesses in Australia

Today social media is a big part of daily life. All over Australia people use Facebook, Instagram, TikTok , LinkedIn and Twitter to stay connected, share updates and find new ideas. For businesses this means a great chance to reach new customers and...

Building an AI-First Culture in Your Company

AI isn't just something to think about anymore - it's becoming part of how we live and work, whether we like it or not. At the office, it definitely helps us move faster. But here's the thing: just using tools like ChatGPT or plugging AI into your wo...

Data Management Isn't Just About Tech—Here’s Why It’s a Human Problem Too

Photo by Kevin Kuby Manuel O. Diaz Jr.We live in a world drowning in data. Every click, swipe, medical scan, and financial transaction generates information, so much that managing it all has become one of the biggest challenges of our digital age. Bu...

Headless CMS in Digital Twins and 3D Product Experiences

Image by freepik As the metaverse becomes more advanced and accessible, it's clear that multiple sectors will use digital twins and 3D product experiences to visualize, connect, and streamline efforts better. A digital twin is a virtual replica of ...

The Times Features

How artificial intelligence is reshaping the Australian business loan journey

The 2025 backdrop: money is moving differently If you run a small or medium-sized business in Australia, 2025 feels noticeably different. After two years of stubbornly high bo...

Top Features of Energy‑Efficient Air Conditioners for Australian Homes

In recent years, energy efficiency has become more than just a buzzword for Australian households—it’s a necessity. With energy prices rising and climate change driving hotter su...

Long COVID is more than fatigue. Our new study suggests its impact is similar to a stroke or Parkinson’s

When most people think of COVID now, they picture a short illness like a cold – a few days of fever, sore throat or cough before getting better. But for many, the story does...

What Makes Certain Rings or Earrings Timeless Versus Trendy?

Timeless rings and earrings are defined by designs that withstand the test of time, quality craftsmanship, and versatility. Trendy pieces, on the other hand, often stand testimony ...

Italian Street Kitchen: A Nation’s Favourite with Expansion News on Horizon

Successful chef brothers, Enrico and Giulio Marchese, weigh in on their day-to-day at Australian foodie favourite, Italian Street Kitchen - with plans for ‘ambitious expansion’ to ...

What to Expect During a Professional Termite Inspection

Keeping a home safe from termites isn't just about peace of mind—it’s a vital investment in the structure of your property. A professional termite inspection is your first line o...