Short sighted fuel fix won’t solve long term oil addiction

by Audrey Quicke

The Government’s temporary fuel excise cut may offer short term reprieve from sky high petrol prices but does nothing to address Australia’s toxic dependence on foreign oil and little to alleviate cost of living pressures on everyday Aussies.

With petrol prices hitting $2.20 a litre or more across Australia, the Government has responded with a temporary 22.1 cents per litre reduction to the fuel excise, halving the tax payable on petrol. This 6-month measure comes with a $5.6 billion price tag (or $2.9 billion minus the Government savings on the fuel tax credit scheme – discussed below).

While intended to ease cost of living pressures, the measure is a drop in the ocean compared to total household consumption spending.  Household consumption was $1,068.5 billion in 2020-21 which, using official forecasts, should increase to $1,170 billion in 2022-23. The fuel tax relief therefore works out to a mere 0.5 per cent of consumption. Much of that ‘relief’ will go to large industrial users of oil, leaving cost of living relief for everyday Aussies at far less than 0.5 per cent of household consumption.

Assuming the excise reduction is entirely passed on to consumers (which the NRMA has warned may not happen), the benefit to your hip pocket will vary depending on what car you drive. A Toyota Hilux owner will save around $18 when they fill up the tank. A Volkswagen Golf owner will save around $11, and Nissan Leaf owner won’t save anything (but if they live in Victoria, they’ll still be slugged with an EV tax). Don’t own a car? There’s nothing for you here either.

This reactive move undermines global decarbonisation efforts by encouraging consumption of fossil fuels and decreasing the incentive to buy more efficient or electric vehicles or reduce car use.

While other jurisdictions such as New Zealand have introduced temporarily cuts to fuel taxes in response to rising petrol prices, these have been accompanied by other policy measures such as easing the price of public transport, and are underpinned by existing long term policy measures like CO2 emissions standards for light vehicles that address long term transport fuel security by reducing the amount of imported oil necessary to power vehicle fleets.

Australia is almost entirely reliant on imported oil to power its transport system and has no long-term plan for transport security or decarbonisation. The Final Liquid Fuel Security Review is overdue, and there is no policy in place to decouple transport from imported oil — including no electric vehicle policy, no fuel efficiency standards, and underfunded active and public transport.

The one thing the budget does offer in relation to vehicle emissions is $6.5 for the Australian Automobile Association to conduct on-road emissions testing of light vehicles. While nominally welcome, this measure would be bolstered by actual measures to reduce vehicle emissions. Federal Chamber of Automotive Industries emissions results released this week show that Australia’s vehicle fleet isn’t even meeting the voluntary emissions targets set by industry.

It is only through moving to electric vehicles and increasing public transport use, cycling and walking that our reliance on imported fuel will decrease significantly.  The sooner this happens, the stronger and more secure Australia will be, making Government less likely to resort to reactive, short term measures when oil prices rise – measures that cost a motza, and don’t even provide much in the way of cost of living relief.

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