Fuel price cuts will be extended for a month beyond the original June 30 deadline, but the discount for July will be worth only half as much as it has been since April.
On Sunday, the Albanese government will announce a 16¢-a-litre cut to the fuel excise starting on July 1, which will deliver a discount of the same amount to the price of petrol and diesel.
A 32¢-a-litre excise discount began in April as a response to fuel prices hitting record highs in March due to Iran’s closure of the Strait of Hormuz on February 28, which choked off about 15 per cent of global oil supply.
The heavy vehicle road user charge, worth 32¢ a litre, was abolished for three months. In July, it will also be reduced by 16¢.
The staged reduction in fuel excise discounts is designed to avoid another round of panic buying, as motorists stock up on cheap fuel in the final weeks before the price cuts end.
Record demand for petrol and diesel in the weeks after the war in the Middle East began caused widespread panic buying, and up to 600 services stations ran out of at least one type of fuel. Australia did not run short of fuel, but the supply chain buckled under the pressure.
“By tapering off the fuel tax cut, this will also help to manage demand at service stations towards the end of the month,” the federal government said in a statement.
Fuel prices are far below the high point of March, when unleaded petrol prices topped $2.50 a litre in Sydney and Melbourne and $3 for diesel.
The average price of unleaded petrol in Sydney and Melbourne, including the 32¢-a-litre discount, is about $1.60 a litre. That is about the same as the week before the Iran war began.
Diesel is selling for $2 a litre, slightly above the pre-war price of $1.80.
Prime Minister Anthony Albanese said the 16¢-a-litre cut would reduce the cost of a 65-litre tank of fuel by about $11.
“Today’s decision recognises that despite the welcome and substantial drop in the price of petrol recently, we know people are still under pressure,” Albanese said.
Forecasters expect fuel prices to continue to fall, amid renewed confidence in the market after the US and Iran signed a ceasefire agreement on Wednesday.
The international benchmark, Brent crude, sits at $US78 a barrel. This is about 7 per cent higher than the oil price before the war but far below the heights of previous weeks and months.
The new discount to the heavy vehicle charge and fuel excise in July is expected to cost the budget $400 million in forgone revenue. The three-month cut of 32¢ is estimated to have cost $2.5 billion.
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Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.
