Australia Fuel Prices Ease Slightly After Excise Cut But Iran War Keeps Oil Costs High In AUD

SYDNEY — Australian motorists are seeing modest relief at the petrol pump this Easter long weekend after the federal government’s temporary halving of fuel excise took effect on April 1, yet global oil prices driven by the ongoing U.S.-led conflict with Iran continue to exert upward pressure on costs measured in Australian dollars.

The government slashed the fuel excise from 52.6 cents to 26.3 cents per litre for petrol and diesel for three months until June 30, delivering an expected saving of about 26.3 cents per litre when fully passed on. Motoring groups reported early price drops across capital cities in the first days of April, with some locations seeing reductions of up to 25 cents per litre for regular unleaded.

In Adelaide, the average price for regular unleaded fell sharply from nearly $2.60 to around $2.34 per litre in early April, according to NRMA data. Melbourne recorded a 16.3-cent drop to about $2.43, while Sydney saw a 12.7-cent decline to roughly $2.44. National averages for regular unleaded had climbed above $2.30 to $2.38 per litre in late March before the cut, with diesel pushing toward or past $3.00 in many areas.

Prime Minister Anthony Albanese announced the measure on March 30 as international benchmark Brent crude surged above $116 per barrel amid disruptions to roughly 20 per cent of global oil supply through the Strait of Hormuz. The tax relief, combined with the suspension of heavy vehicle road user charges, aims to ease cost-of-living pressures on households and businesses hit by the energy shock.

Despite the excise cut, experts warn that the real crunch for Australia’s fuel supply may still arrive in mid-to-late April. Australia imports more than 90 per cent of its refined petroleum products, primarily from Asia, and supply chains have been disrupted by export caps in South Korea, reduced refinery runs and rerouting of cargoes. Some analysts predict potential restrictions or shortages by around April 20 if the conflict persists, as voyage times lengthen and alternative supplies from the U.S. and Europe take time to arrive.

Brent crude, the global oil benchmark, traded around $109 per barrel on April 2 after volatile swings, reflecting a sharp monthly rise but some pullback from recent peaks near $116. With the Australian dollar hovering near 0.69 to 0.691 U.S. dollars in early April, the effective cost of imported oil in AUD remains elevated compared with pre-conflict levels.

The conflict, now in its fifth week, has caused Brent prices to surge dramatically since late February, with some periods showing monthly gains exceeding 30 per cent. Australia’s heavy reliance on imported refined fuels — rather than domestic crude production, which has declined significantly — amplifies the impact. Domestic oil output stands at low levels, with only two operating refineries contributing a small share of national needs.

Retail fuel prices in Australia rose about 40 per cent in the month following the start of strikes on Iran, according to various reports. Diesel prices climbed faster than petrol in many cases, surpassing $3 per litre in several capital cities and adding significant costs for transport, agriculture and construction. Farmers and logistics operators have reported surcharges and supply concerns, with flow-on effects to food prices and broader inflation.

The government has taken additional steps to secure supply, including underwriting spot cargoes, relaxing fuel quality standards to allow more production flexibility and sourcing alternative shipments. Energy Minister Chris Bowen has indicated that deliveries are assured into mid-April, but longer-term stability depends on developments in the Middle East and diplomatic efforts to reopen the Strait of Hormuz.

Motorists are advised to shop around using apps such as FuelCheck or PetrolSpy, as prices can vary by 20 to 40 cents per litre within the same city. Many service stations passed on portions of the excise cut quickly, even before depleting higher-cost stock, but full transmission may take weeks in some regional areas.

Economists note that sustained high oil prices could influence Reserve Bank of Australia decisions. The RBA raised the cash rate in March amid inflation concerns, and further energy-driven pressure may complicate the path back to target. The Australian dollar has shown some resilience but weakened slightly against the greenback in recent sessions as global risk sentiment fluctuated.

For households, the excise cut provides temporary breathing room. Filling a typical 60-litre tank could save around $15 to $16 at current rates, though this benefit may erode if international crude prices climb again or if supply disruptions lead to rationing or higher margins at the pump.

Businesses, particularly in freight and agriculture, face steeper challenges. Diesel, critical for heavy vehicles and machinery, has seen sharper increases, with some operators reporting costs up by $1 per litre or more since February. Construction firms have added fuel surcharges of 8 to 10 per cent in some cases.

Longer-term, the crisis has renewed debate about Australia’s fuel security. Critics point to the closure of most domestic refineries over the past 15 years, leaving the country vulnerable to global shocks. Calls have grown for investment in refining capacity or strategic reserves, though the government maintains that current measures and diversified sourcing provide adequate buffers for now.

As the Easter long weekend begins, with many Australians travelling, fuel availability appears stable but prices remain well above 2025 averages. Public transport usage and fuel-efficient driving tips are being promoted to help manage costs.

Looking ahead, any de-escalation in the Middle East or successful reopening of key shipping routes could ease pressure on oil markets and flow through to lower AUD-denominated prices. Conversely, prolonged disruption risks further spikes, testing the three-month excise relief and broader economic resilience.

The Australian Institute of Petroleum and motoring organisations continue to monitor weekly trends. Consumers should check local prices daily, as volatility persists. For businesses reliant on fuel, hedging or forward contracting where possible may offer some protection.

In summary, while the government’s excise cut has delivered noticeable short-term relief at Australian service stations, the underlying driver of high oil costs — geopolitical tensions affecting global supply — keeps the situation fluid. Australians are paying more in AUD for fuel than they were before the conflict, but the full extent of April’s potential supply challenges remains to be seen.

The coming weeks will be critical as supply chains adjust and markets watch for any breakthrough in Middle East diplomacy. For now, the combination of policy relief and cautious optimism about alternative sourcing is helping to stabilise the domestic fuel situation amid an unpredictable global energy landscape.