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Forget $2 a litre - here’s how expensive petrol could really get

·3-min read
Petrol prices displayed on a sign at a petrol station in Sydney and a person removing $100 notes from a wallet.
Petrol prices mey get as high as $2.70 a litre, experts warn. (Source: Getty)

As Aussie motorists come to grips with the prospect of regular unleaded petrol soaring to all-time highs of $2 per litre, experts are warning prices could jump significantly higher.

Prices could edge towards $2.70 a litre based on JP Morgan’s latest prediction of oil prices rising to US$185 a barrel by the end of the year, according to at least one expert.

The conflict in Ukraine is driving oil prices up, with talk of an all-out Russian oil embargo led by the US triggering additional volatility in an already chaotic global oil market.

Deakin University professor Vlado Vivoda said a lot hinged on the US dollar and Australian dollar remaining stable. He said if the Australian dollar weakened, prices could soar even higher.

Could cuts to the fuel excise tax work?

Independent senator Rex Patrick has called on the Federal Government to cut the fuel excise tax - which is used to fund road infrastructure - by 50 per cent.

Patrick said the federal excise of 44.2 cents per litre was a major component of fuel costs.

“The average motorist paid about $775 in fuel excise in 2021, based on approximately 35 litres a week in petrol consumption,” he said.

But Vivoda warned against cutting the fuel excise tax, especially in light of the damage to road infrastructure caused by floods in NSW and Queensland.

He said governments should focus on supporting electric vehicle uptake and clean energy generation to reduce Australia's reliance on volatile global energy markets.

How to get cheaper fuel

There are several apps that show the cheapest fuel in your area.

Some states and territories have mandatory fuel prices databases but there are also third-party apps populated with crowdsourced data.

So why are petrol prices going so crazy?

Vivek Dhar, CBA mining & energy economist, said bans on Russian oil would exacerbate existing challenges for Russian oil imports.

Dhar said existing sanctions had frozen about 70 per cent of Russia's oil exports.

“So, because of that, you're really seeing oil trade out of Russia impacted,” Dhar said.

He said people expected things to settle over the next few months but the threat of an oil embargo meant commodity trade financing was going to be “very challenging”.

Vivek also expected petrol prices in Australia to keep rising, estimating a litre of fuel could cost around $2.40-$2.45 if the price of oil reached US$150 a barrel.

Global oil markets should eventually stabilise

Vivoda said the US was mainly an oil exporter and did not import much Russian oil.

He said Asian and European countries were the biggest importers of Russian oil, including China - Russia’s biggest customer. He said China was unlikely to stop importing Russia’s oil.

Germany has also said it has no choice but to continue sourcing Russian oil.

Vivoda expects the market to rebalance itself eventually but it will need extra supplies from petroleum reserves as well as existing producers.

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