Australia Cuts Fuel Excise Amid Middle East Oil Disruptions

The Australian Government has introduced a temporary fuel excise cut and released 762 million litres of fuel from reserves to combat rising domestic energy costs. Petrol prices in capital cities have climbed above $2 per litre, while diesel has reached approximately $2.50, driven by Brent crude rising to $US108 a barrel.

Fuel security has been compromised by renewed conflict in the Middle East and Eastern Europe. Iranian-backed Houthi forces seized strategic islands in the Red Sea and gained military control over the Bab el-Mandeb Strait to target Saudi Arabian oil shipments. This follows a February attack on Iran by the United States and Israel that reduced vessel movements in the Strait of Hormuz. Additionally, Ukrainian strikes have eliminated 25% of Russian refinery capacity.

Energy Minister Chris Bowen initially stated there were no immediate plans for a second excise cut, noting that the government would not respond to every daily movement in world oil prices. However, the government has since implemented the cut and announced plans for a new government-owned reserve of one billion litres of diesel and jet fuel. As of September 12, Australia held 41 days of petrol, 32 days of diesel, and 30 days of jet fuel reserves.

Industry groups have expressed concern over regional stability. GrainGrowers and the Victorian Farmers Federation warned that supply shocks could cause strife during the peak harvest season, while the Australian Independent Fuel Retailers Association cautioned that while supply is currently stable, a price issue is likely.