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Prime Minister Anthony Albanese will likely be left dealing with sky-high petrol prices just months into government when the halving of the fuel excise ends.

The excise cut – which slashed the tax on every litre of fuel from 44.2 cents to 22.1 cents – is due to expire on September 28, a commitment Albanese has already agreed to.

It was the policy of then-treasurer Josh Frydenberg and formed the centrepiece of the Morrison government’s pre-election federal budget focused on addressing the soaring cost of living.

Australian petrol prices are set to hit $2.20 a litre, and will likely only rise further when the fuel excise cut ends on September 28. (Flavio Brancaleone)

In real-world terms, if a motorist was filling up a 40-litre fuel tank on average they would save around $10 per tank or $250 over the entire six months.

But economists predict that motorists will bear the brunt of global factors forcing up the price of oil.

Already, hikes to the price of petrol sold at Australian retailers have effectively consumed any savings gained by the excise cut.

In a research note released yesterday, CommSec’s chief economist Craig James said petrol seems “set to return to record levels”.

“Australia’s wholesale petrol price lifted by 9.1 cents a litre last week,” James said. 

“The record Australian average unleaded pump petrol price was 212.5 cents a litre in the week to March 20 and currently prices are just over 13 cents from record highs.”

SYDNEY, AUSTRALIA - MAY 22: Prime minister-elect Anthony Albanese speaks to the media on May 22, 2022 in Sydney, Australia. Labor leader Anthony Albanese will be sworn in as Australia's 31st Prime Minister on Monday following his victory over Scott Morrison in the Australia Federal Election (Photo by James D. Morgan/Getty Images)
Anthony Albanese’s first months in government will be marked by Australians struggling under the soaring cost of living. (Getty)

According to the Australian Institute of Petroleum, the national average unleaded petrol price rose by 14.1 cents in just seven days, marking the third biggest increase on record.

The national average price for unleaded is sitting at an eight-week high of 199.1 cents per litre.

Australia takes its wholesale or terminal gate fuel price from Singapore MOGAS, which spiked nine per cent last week to record its highest ever price.

Fundamentally, retailers are paying more for fuel which will then be passed on to consumers, regardless of how much government tax is being imposed on every litre poured.

Petrol prices are approaching record highs – and that’s already with government tax on every litre cut in half. (Peter Rae)

Yesterday, incoming Treasurer Jim Chalmers acknowledged the price of fuel is severely impacting household budgets, but stopped short of promising an extension to the fuel excise cut.

“That will make life harder for people. They are also getting punished at the petrol pump, of course, at the moment with petrol prices going back up again,” he said.

“Obviously we’ll have a look at the conditions at the time when it comes off.

“We’ll have a budget not long after that and if there’s more that we can do to ease the cost of living pressure on people, we’ll do that.”

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