Why Did Fuel Prices Increase despite The Cut in Fuel Excise?

It seems the less the government does about the cost of living the better it is. Can any economic experts(everyone) explain the craziness of the government policies that are fuelling inflation?

They don't want house prices to crash but affordable housing is a priority. Want wages to increase but inflation down. If rates increase then rents have to increase. How do people afford to even rent?

People have a lot of money in their accounts. Let them spend. Why are governments giving free money and increasing prices further?

In the name of helping low-income families, they are fuelling price rises.

Poll Options

  • 53
    Government should do more
  • 270
    Government should do nothing

Comments

  • +7

    I saw a United by a highway for $2.22 while everyone was $1.90ish a week ago. Talk about price gouging.

    The real issue is that when the government introduced this the oil prices were a lot cheaper than what they are now. I believe a week ago it increased a fair bit and thus we're seeing higher prices.

    • +8

      I filled up today at our local United and it was $1.73/l, and I checked petrolspy, most other places around are $2+. Hence the fill up.

  • +22

    What can the government do? oil prices are set globally - even with the fuel exercises 44 cents is tax plus the GST on top of the total price

    Right now Oil is over 100USD a barrel

    even if the government both state and federal got rid of all tax on fuel you would still probably be paying over 1.90 a litre

    • +1

      Isn’t it more before the fuel excise cut

      • -1

        no it is 22 cents now i think

        https://www.google.com/search?q=australia+fuel+excise+tax&rl...

        according to this it is normally 44.2cents

        so even if it was zero and assuming the fuel companies pass on the cut your still almost paying 2 buck a litre

        • +7

          No crude oil price was more before fuel excise cut

          • -18

            @peeltheonion: it hit around 130USD a litre but petrol prices hit around 2.60 a litre before the cut

            most of the prices ive seen are around 2.20 so it is about right esp considering shipping costs have gone up

            People on this forum are going to cry when the ALP get elected because they are going to realise that Albos wage promises are going to hit cost of living hard - the sheer lack of understand of basic economics from the avg Australia actually worries me

            • +14

              @Trying2SaveABuck: And the fact that you think oil hit $130 USD a litre actually worries me.

              • -26

                @KangaDrew: it hit 123.7 usd a liter on the 8th of march - i did say 'around' 130 usd

                it has been around or over 100usd a barrel for months now the target oil price is between 40-60usd

                go back to school kid - ive been trading oil and gold for almost a 3 years now peak covid it got to like 20 dollars - twas a good time for shorts.

                • +13

                  @Trying2SaveABuck: Weird flex, but OK.

                  Clearly you're still unable to read properly.

                • +4

                  @Trying2SaveABuck: consistent pseudo-intellectual commentary. Please lift your fingers off the keyboard and let the adults lead the discussion.

                • @Trying2SaveABuck: you mean barrel, not litre, it was never 123.7 per litre, it was per 42 gallon drum, that is what they are talking about

            • +5

              @Trying2SaveABuck: it hit around 130USD a litre

              Huh?

              • @DazMon: Well, that's hit my threshold. 129 USD a litre was where I switch from car to skateboard.

                • @Click_It: 2.5 cents per kilometre. Now available in skateboards.

            • +12

              @Trying2SaveABuck: ScuMo's scare mongering was just an off the cuff reaction to genuinely desperate calls to keep the lowest earning workers heads' above water.

              Inflation is not going to sky-rocket due to a 5-5.5% wage rise of award earners, prices may rise by a tiny percentage of that increase. We have seen similar increases at least 3 times in the 2000s, and the sky didn't fall then. New Zealand just made a 6% rise to wages so 5% is pretty modest.

              The economic idea of stagnating wages while Inflation grows every year, is a callous attack on the living standards of the vast majority of Australians, to appease corporate CEOs and shareholders.

              If you think ScuMo would hold a hose to gelp Aussie battlers who are literally on fire, you're deeply mistaken.

              Personally I'm not on an award, I have a negotiated wage but I'm fully supportive of everyone getting paid fairly, not just those at the capstone of the pyramid.

            • +4

              @Trying2SaveABuck: You mean crude oil hit that price per barrel, not litre, that's what previous people were alluding you to

            • @Trying2SaveABuck: @Trying2SaveABuck Right…
              How does correlating ALP's voter base with economics have anything to do with the fuel price?
              LNP shill. Who are you to preach about economic theory? I doubt you even passed year 12 general maths.

    • +21

      What can the government do?

      Increase Renewables investment like hydrogen

      Stop dependency on imported fuel.

      • +15

        Hydrogen is not a renewable. You need to make it, mostly it is made with fossil fuels. There is 'green' hydrogen but it is prohibitively expensive.

        • +1

          It's also:

          • highly explosive/flammable (see: Hindenberg)
          • extremely difficult to store:
            • aforementioned flammability
            • leaks through many materials/seals
            • requires either exceptionally large volume storage vessels or exceptionally strong pressure vessels

          I don't think hydrogen will ever reach the energy density of petroleum, which is fine, but a switch to hydrogen isn't simple.

          • @Chandler: I got nothing against hydrogen certainly if we can find a way to process hydrogen with say excess solar and use that as an energy source, that would be ideal. Its a way off but not inconceivable. And as you said there are still other limitations.

            • @benny082: Reading my comment again it looks like I'm bashing hydrogen, which I suppose I am, but like you I don't have a problem with it. However, there are a few problems with it that need to be overcome for it to be a more viable replacement, especially for it to be used as a fuel for propulsion.

          • +1

            @Chandler: Almost all the problems you listed are overcome if you store the hydrogen as liquid ammonia.

            • barely flammable, and while an air-ammonia mixture can be made to explode, you need to supply a LOT of energy to make it explode
            • easy to contain
            • changes from a gas to a liquid at -33 degrees C, or by quite modest pressurisation at less than 10 atmospheres at 20 degrees - hugely lower than the 350-700 atmospheres hydrogen is typically stored at.

            It doesn't reach the energy density of petroleum though, about 1/3rd the density. It can be used as fuel in an internal combustion engine, when mixed with either petrol or ethanol to enhance its ignition.

            Have a read of these websites for an idea of its practicality as a fuel:
            http://nh3car.com/
            https://nh3fuelassociation.org/2013/06/20/the-amveh-an-ammon...
            https://cen.acs.org/business/petrochemicals/ammonia-fuel-fut...

            It's not the perfect energy storage medium, but it's a lot better than hydrogen in almost every way.
            Two negatives of ammonia:
            - it takes significant energy to convert hydrogen into ammonia. But that can be supplied from solar power.
            - ammonia is quite poisonous. However it's very easy to detect tiny leaks by smell, unlike hydrogen.

      • +5

        Our incumbent government is personally heavily invested in gas and coal, so renewable sources are a threat to their portfolios, at least until all of those companies completely divest from all fossil fuel extraction and export.
        While the coalition keeps sponsoring countless millions into CCS and gas exploration, that seems unlikely even if those investments don't reap a cent of profit in the long-term, the public donations are still free money for nothing. Ethics and responsibility don't factor into it at all for listed companies, only dividends and quarterly earnings.

        • +2

          You'll be pleased to know that on top of the $2B subsidy to oil refineries last year, the government just slung over another $250M to them to prop up the 'free market'.

          • @Dogsrule: The 'free market' usually has the answers but not always. There are certain things that need to be done for national security reasons, but the market doesn't see a way for them to make money. Oil refining, in Australia's context, is one of those things. We have to be able to refine oil. End of. If we don't refine it here, it would have to be refined somewhere else but we'd still need the final products. Subsidies are usually a had idea, but not always.

            • @R4: There are many nations that have no local oil refineries and they do just fine because, unlike Australia, they adhere to their reserve fuel storage responsibilities set out by the International Energy Agency.

              As the article I linked says, our supply chain fragility remains even with local refineries, because they still rely on imported oil to operate.

              • @Dogsrule: Agree that our oil reserves are criminally inadequate and successive governments have refused to sort this out. However, Australia produces about 380 000bpd of crude oil and we consume roughly 900 000bpd. So 42% of our oil requirements are produced locally. That has to be refined somewhere, although, bizarrely, we export a lot of it and import it as finished products. That's crazy.

                Many nations don't have oil refining capabilities, but any country of substance does

                • @R4:

                  bizarrely, we export a lot of it and import it as finished products. That's crazy.

                  Funny that, it's almost as though the global oil supply chain is designed to maximise the profits of oil companies through begging for government subsidies by creating artificial supply insecurity.

                  I acknowledge your points, but consider them as an instructive lesson to wean ourselves off expensive and fragile oil supply chains towards electrification.

                  That's a topic for another day though.

      • +2

        Hydrogen is just a geopolitical replacement for fossil fuels. Only rich countries can afford to produce it and they damn well know it, and want it that way. That's why they're ignoring renewables that are accessible everywhere much cheaper, because that will upset the balance of power and money.

      • Grid scale, turnkey battery storage deployments are available right now in capacities of up to 1GWh using long life LFP batteries. They can be deployed in as little as 3 months using 3 acres of land.

        Pair them with a bunch of solar panels and we can electrify anything short of heavy freight trucks/trains and (most) aircraft and ships. Hydrogen can take care of those, but it shouldn't be in cars, light/medium trucks and homes.

    • +3

      Over $100USD for oil, yikes. We've come a long way from the -$30USD (yes that's right, negative) that it was going for back in 2020.

      • +30

        Funny how when it was -30 the prices didn't drop to reflect that.

        But hey, we all know it's a bs corrupt system that we're a slave to D:

        • +3

          Careful… the ACCC will name and shame both oil companies….

      • +6

        Back in 1982 the oil price was over $100USD but petrol prices where 59c / litre. I have never been able to work out how the two are related even though they should be.

        • +6

          where did you get those prices from? 1982 oil price was in the 30-40 dollar range. You aren't making the mistake of looking at the inflation adjusted prices are you? if so then you need to make that same adjustment to the fuel price if you are going to compare that way, which a quick calculation would put your $0.59 at about $2.20 a litre.

          • +9

            @gromit: You are correct. The first chart I found has a little tick box up the top saying inflation adjusted. Thanks for pointing this out.

    • +11

      I don’t hold a hose mate.

      • +3

        Yeah scummo goes into the convenience to fill up on jellybeans while the driver fills up the com car!

      • +4

        He just holds a piece of coal.

    • +1

      Oil prices were over $100 a barrel in 2014 but was not this price at the pump.

    • Fuel excise tax should be scrapped altogether.

  • Money.

    The fuel prices are definitely going down in the week to the election as is tradition to keep people not talking about it. Top up next Friday!

    • -1

      Is that a real thing? Was thinking about filling now despite having a half full tank, in preparation for the incoming price spike.

    • +1

      Depends what the BP analyst wants to do, keep with their "independent" cycles or accidentally create a super cycle pricing event.

  • +1

    Oil countries / cartels are run by the nicest military dictatorships

    • +5

      Our allies.

      • That our other allies ordained

  • +3

    If a farmer sells you fruit at cost price, but the cost of production increases, the price you pay still increases. No onion to peel here.

    • -3

      No I didn’t mentioned about food inflation at all. I understand that. I am talking about the government policies to contain inflation which are causing more inflation.

    • +1

      Or you stop paying farmer, and farmer looses business, (aka recession occurs again)

    • +1

      If a supermarket sells you fruit at market value, but the media says a war is causing inflation, the price you pay still increases. Onions are half price after supermarkets doubled the price!

    • Just in case you don’t realise those produces in supermarket are average 3-6months+ old, some fruit like apple can be kept over 1 year, so the farmer still don’t get the pay raise.

      Purely greedy companies tend to trade like stock market, sell price goes with the news instead of stocked price + earning margins, hence anything happen on other sides of the world it will affect here.

  • +8

    People have a lot of money in their accounts.

    I dont really think so

    • Where did 300 Billion dollar pandemic money go?

      • +23

        To stupid business like Gerry Harvery etc.

        Anyway That's not the point, point is that money is long gone from general people's account. Its in business accounts not in ordinary people's banks accounts. (Not in poor/lower middle class's at least)

        • +10

          I am in that poor/lower income class you mentioned. I feel like government shouldn’t give free money to anyone anymore. It will be detrimental to people like me if food inflation really increases.

          • +4

            @peeltheonion: Yes I am in that same income threshold too,

            we just need to understand the number 1 tax on poor is **inflation.

            free money printing is not something that gets rid of poverty, rather separates the rich and poor even further.

            I also think government need to stop funding laziness of people staying at home (intentionally being jobless), and remove the cap of maximum income limit from Centrelink if earnt $X per week (aka stop encouraging people to reduce the number of working hours)

            • +4

              @USER DC: Inflation isn't a tax on poor people, but rather a tax on those with uninvested savings

              The real tax on poor people is wage stagnation and bracket stagnation; all these businesses refusing to pay even CPI to their employees, and when they do get a pay rise that just goes into the highest tax bracket they pay

              We really need to legislate CPI increases to salaries, super caps, tax caps, HELP repayment thresholds etc

              • +1

                @Jolakot: If pensioners get an rise with indexation, I've no idea why income tax brackets shouldn't be indexed too. Clearly the implication is that those who actually work for their money can go suck a fat one?

              • +1

                @Jolakot:

                Inflation isn't a tax on poor people, but rather a tax on those with uninvested savings.

                It's a tax on people without assets. ie poor people.

                • @trapper: If $1 becomes worth $0.5 overnight, but my salary doubles from $60,000 to $120,000 and the various tax brackets, super brackets, help repayment brackets etc update accordingly, then what have I lost?

                  Meanwhile my debts to earnings ratio halves, the only loss would be the money I have in my bank account or in cash halving in value, which obviously impacts the rich more than the poor as someone paycheck-to-paycheck loses almost nothing

                  In reality the tax on the poor here is employers and governments forgetting about CPI for anything that isn't in their favor, inflation isn't a boogeyman

                • @trapper: Simple fix.

                  Don't keep savings in 💩 fiat 💵. Invest them in hard assets.

            • @USER DC: 100 remove the cap, or make it more balanced anyway. The longer you're outa work, the less likely to go back. Incentivise ppl to want to get off payments ( i get that some create their own incentives but others have more incentives Not to).

        • you aren't wrong mate. I knew business owners during the pandemic who made a larger bottom line essentially not trading!

      • +2

        Houses and cayman islands

    • +2

      Australia savings rates (as a percentage of income) hit record highs during the lockdowns and is still a long way above average levels. Perhaps that will change a bit with inflation hitting consumer goods and will also likely change with interest rate increases; but plenty of people have been saving a lot of money and plenty of people will still be saving plenty of money

  • +4

    AUD went from 75c USD to 68c USD which is 10% down. If crude stayed steady from a month ago fuel is up 10% from the last lowest point. In Melbourne the last cycle ended at $1.60. This cycle it ended at $1.69. So it is about right.

    • But now fuel prices at bowsers are more than what it used to be before fuel e ice cut despite reduced crude oil prices?

      • +4

        Just the cycle. The top is always crazy. Game is to pick bottom. I filled up ULP at 1.679 using 7-11 lock from last week. It was basically bottom. Although I missed out Woolworths 1.689 + 4c off.

  • +2

    They don't want house prices to crash but affordable housing is a priority. Want wages to increase but inflation down. If rates increase then rents have to increase. How do people afford to even rent?

    Welcome to economics. Every action has a 1000 reactions. Inflation and wages is an interesting one - if inflation goes up, but wages dont go up, then essentially the owners of the business (capital) maintain their incomes but the workers lose. However, if wages go up and prices dont, then its the reverse. But if wages go up then businesses might seek to increase prices again - the wage price spiral

    So the ideal is inflation goes up, wages goes up but a bit less than inflation, pain is shared and then interest rates go up and reduce demand, which reduces prices and its all back to normal, wages go up based on productivity rather than based on inflation

    But interest rates go up causes house prices to go down (good or bad thing depending on where you are) and potentially makes houses even more unaffordable for people who need to borrow a lot (because higher interest rates mean they cant borrow as much, and their borrowing capacity is reduced by more than the amount prices go down). Higher interest rates cause greater costs for businesses, so they become less profitable and seek to increase prices…

    • -1

      Isn’t it a rat race we are in, where end of the day house always wins?
      Isn’t If people focus on needs rather than wants is the solution?

      • +1

        That’s not what a rat race is defined.

        Needs is food, clothing and shelter (not ownership).

        • shelter (not ownership)

          only if our government like Singapore sort it all out, for once and for all…

    • So the ideal is inflation goes up,

      Inflation going up is never good.

      • ‘If’ inflation goes up. As per context of the entire comment

        • +1

          There is no ‘If’ inflation goes up.

          It's up (CPI 5.1%) and will keep going up because that is the only way the feds can devalue people's savings and force them to work.

  • +7

    "Can any economic experts(everyone) explain the craziness of the government policies that are fuelling inflation?"

    From a non-government economic expert:

    "This is the worst possible crop of world leaders I think in human history. They are, really at this stage, completely collapsing the world economy. Once you have undermined the global financial economy, you have removed the benefits and then it does turn to war. Buy everything you think you will need because it will never be cheaper, and it may not even be there in the future at any price. This is the worst crop of world leaders I have ever seen, and I have been consulting governments for 40 years… . The level of stupidity on the world stage is stunning."

    • Any solutions to be normal? I think change should start with people rather than on top.

      • +1

        Yes, any salvation in this context has to come from the bottom up. The results of the next election will indicate how well that is going. Otherwise, as the Buddhists say 'Be the change you want to see in the world' we don't HAVE to be swept along with the rest of the mob if we don't want to.

        • +5

          I am definitely in the responsible spending group. I didn’t buy anything except food and gym for me in the past 2-3 years. That’s how with 70k single income and 2 kids and mortgage don’t have any financial issues.

          • +5

            @peeltheonion: Well done. And therein lies the problem. You have manages your own financial affairs properly but the politicians are happy to pinch half of your money and piss it away on all kinds of nonsense (and not I'm not talking about 'roads and schools). Their is a socialist myth pervading western politics ATM that believes you can never run out of other people's money, it is a false myth that has been proven wrong numerous times in the past, but because most people have very short attention spans or didn't look into history for themselves they will keep voting in the kind of politicians who have led to where are now.

            But then if most politicians were capable of succeeding in the real world I guess they would be out there doing that instead.

          • @peeltheonion: Came back just to say, good on you. :) That's no easy feat and you should be crazy proud of yourself.

  • +8

    Just wait until we end up with a billion dollar hole in the budget to maintain roads. Frydenburg will be laughing all the way off into the sunset when it's no longer his problem.

    Literally a short lived sugar hit to protect them in the run up to the election.
    Only thing is the fuel stations just pumped their prices back up. Short term solutions is what this government is good at and unfortunately a lot of Australians will fall for it.

    • Do you think ALP will do any better or worse?

      • +17

        From history the coalition have held 7 of the worst 10 performing treasurers.

        So yes
        I believe the ALP would have done better

        This strikes me as throwing money at something hoping it'll magically go away. It's reckless and the only ones to benefit are the petrol companies. Once the bandaid comes off in 6 months time it'll likely be under a Labor government and they'll cop the flak for it.

        • +1

          Aren’t ALP promising more spending. I am no way supporting coalition government. They did worst job with the money. My 5 year old will be more careful with the money.

          • +12

            @peeltheonion: ALP spend money in a way that stimulates the economy in return for services and infrastructure.

            Coalition spends money in a way that stimulates Harvey Norman, JBhifi, their property developer mates and Coles by giving them free labour.
            And not in a good way, just look at what spending $750 billion bought us, not a lot.
            If you break it down Frydenburg spent about $100,000 per job that was saved. May as well of brought in a Rudd style universal stimulus package.

            • +1

              @Drakesy: This is the correct answer.

              In our Fiat system, money is borrowed into existence. There is nothing wrong with that, but it does mean what you do with that newly created money has an overall effect on the economy.

              Borrowing to invest and build infrastructure, excellent!
              Borrowing to fund consumption, terrible!

              See my explanation about Fiat and one of the causes of inflation that we're currently experiencing here:

              https://www.ozbargain.com.au/node/697033#comment-12065425

          • +7

            @peeltheonion: This is the problem. The Coalition spends what 120b or something in the 12 months running up to the election (arguably on electorate sweeteners in many cases) - but as soon as the ALP suggests spending a couple of billion on something it's like the whole sky is falling in.

            The current government has really done poorly on managing the economy - even before COVID hit - despite their PR. Labor seems to have done better in IMO in the past, but who knows with this current crop…

            But they're both limited to following what the average person wants/thinks - and as much as I want to believe that people won't vote for whoever is offering them the most moolah - the recent past evidence says otherwise.

            As the old saying goes - "It doesn't matter who you vote for, you always get a politician".

  • +8

    Yes, government should do more on Australia's dependence on critical resources controlled by foreign companies/governments.

  • +1

    Prices are down 50cents compared to before the cut around me.

  • Eat the rich… It's price gouging by the companies. They need to pay their staff, the CEO's and boards' obscene salary, and their shareholders.

  • +3

    ditched the car early pandemic, WFH and got a bike. Have easily saved over 10k since, (3 insurance and rego cycles + petrol)

    have not looked back

    • +1

      How much do you spend on rent to live close to everything?

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