Petrol prices could surpass $2 a litre and diesel $2.40 in coming days, after the government’s 16-cent discount ends on Sunday.
The 32-cent per litre reduction in fuel excise, introduced in March at the peak of the fuel price spike, was halved to 16 cents in July.
The excise will return to its normal level on 3 August, adding 16 cents per litre to the wholesale prices paid by service stations.
Chris Bowen, the energy minister, told reporters on Saturday the government would not extend the temporary cost-of-living relief.
“Obviously we always monitor the situation and take steps as necessary, but our policy decision is clear,” Bowen said.
A 16 cent increase in fuel prices would add $8.80 to the cost of filling up, for a vehicle with a 55-litre tank.
Tom Woodlock, a senior market analyst at Argus Media, said service stations typically took four or more days to adjust prices at the pump to match changes in excise or overseas pricing.
Retailers have already passed higher wholesale fuel prices on to customers after the US resumed strikes on Iran in mid-July, pushing up oil and import costs.
Unleaded petrol prices have risen to 205.6 cents per litre in Canberra, 204.4 in Darwin and 200.5 in Hobart, according to MotorMouth data on Saturday.
Petrol costs more than 190 cents in every capital city, meaning it would pass 200 cents if the 16-cent increase was passed on in full.
Melbourne was facing diesel prices of 242.7 cents per litre on Saturday, up 68 cents from its June low of 173.9 cents, according to Motormouth. Canberra was at 244.4 cents a litre, Darwin at 244.1 and Hobart 241.8.
Diesel costs more than 235 cents per litre in every capital city except Perth, meaning it would pass 250 cents if service stations pass on the price hike in full.
The strait of Hormuz has been almost completely closed to traffic since Iran and the US returned to fighting two weeks ago. Iran struck two tankers under US escort on Friday after the two countries resumed trading strikes this week.
Brent crude oil, the global benchmark, has risen from about US$70 on 2 July to nearly US$90 on Saturday, pushing up import prices in Australia’s region.
Some analysts have predicted oil prices will return to US$100 a barrel if conflict continues. In March, when oil hit that price, and Australia had no fuel excise relief, petrol surpassed 250 cents a litre, and diesel passed 300 cents.
Economists have credited the excise discount with suppressing Australia’s inflation rate and supporting household spending as the economy weakens. Shane Oliver, AMP’s chief economist, said in a note on Saturday the loss of the discount could push petrol prices up to 210 cents a litre.
“This will push up headline inflation again as well as the cost of the average household’s weekly fuel bill by around $20,” Oliver said.
Bowen on Saturday defended the decision to end the discount and the related heavy vehicle road user charge, paid by trucks. He warned against panic buying and repeated the government’s call for motorists to buy only the amount of fuel that they need.
“I think Australians have understood … this is a temporary measure,” he said.
Bowen said Australia had 43 days’ worth of petrol stocks, 39 days of diesel, and 34 days of jet fuel. As of Saturday, 44 fuel ships were on the way to Australia with 3.1bn litres set to be delivered in the coming month, consistent with previous weeks, he said.
Fuel orders were locked in through up to October, and no orders to Australia had been cancelled during the international crisis, Bowen said.
