Australia faces a race against time to avoid another fuel price shock, as analysts watch to see if the latest breakthrough to end the Iran war can deliver cuts to the cost of oil before the Albanese governmentโs 26ยข excise relief expires at the end of June.
Motorists across the country have enjoyed nearly a month-long window of lower average fuel prices, which have fallen to $1.80 a litre for regular unleaded and $2.30 for diesel, according to the Australian Institute of Petroleum.
Prices began easing back from record highs in April after a ceasefire in the Middle East pushed down the cost of crude oil, the resource refined into fuel, and the federal government moved to temporarily halve the fuel excise.
However, global oil markets remain on edge and are highly volatile. If global prices do not drop significantly in the next few weeks, the reinstatement of the full fuel excise could send pump prices soaring overnight to potentially back above $2.10 a litre for regular unleaded, said Peter Khoury, a spokesman for the National Roads and Motorists Association.
โYouโd want this to end before the end of June,โ he said.
Fuel prices in Australia rise and fall in line with crude oil markets, typically with a lag of seven to 10 days.
Oil markets showed signs of cautious optimism on Monday, as investors reacted to reports of the United States and Iran edging closer to finalising a peace deal. The agreement would reopen the Strait of Hormuz, a vital trade route that usually carries up to 20 per cent of the worldโs oil supply but has been effectively blocked since the war began. Brent oil, the global benchmark, tumbled 6 per cent to about $US97 a barrel on the news, while US-traded West Texas Intermediate fell to $US92.
Analysts described the diplomatic progress as โsome light at the end of the tunnelโ, which could bring near-term oil price relief if it led to a lasting deal. However, they warned that the damage to global energy supplies and shipping flows had been so severe that it would outlast the war, even if it ended tomorrow, and would keep oil and fuel prices above pre-war levels for some time.
โThis is just the start of a long and complicated process to restore oil flows, which could take several months at best,โ MST Marquee energy analyst Saul Kavonic said. He pointed to the need for energy companies to repair damaged oil assets, restart shut-in production wells, secure safe passage from Iran, arrange shipping insurance for the risk of traversing a recent war zone, and replenish global fuel stockpiles that had been drawn down to buffer the global economy.
โA degree of oil shortages could persist well into 2027 due to damage to some oil reserves and infrastructure that could take months or even years to repair,โ he said.
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Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.
