Cut fuel excise – or solve the problem?

Originally posted on 20 March 2022

With the price of unleaded petrol now over $2 per litre, the government is signaling a cut in fuel excise but this is no solution to higher prices or reducing transport emissions.

Here’s why it’s a bad idea:

• Removing fuel excise entirely would initially cut fuel costs by 44 cents per litre but cost over $20 billion per year in revenue – money that currently helps fund road works.
• Lower fuel prices would encourage more consumption, reduce the incentive for smaller, more fuel efficient vehicles, for EV take-up, public transport, bike riding and other alternatives.
• Australia would be more dependent than ever on imported fuel
• Australia would still have only about 3 weeks supply of liquid fuel in the country
• Increased volatility and demand for fossil fuels will force the price up again so both the motorists and the budget are both worse off
• Road congestion will increase costing motorists billions in lost time and extra fuel
• Greenhouse gas and other pollution with adverse effects on health would continue unabated.

Here’s what might help solve the problem:

Spend $20 billion to help Australians with the cost of transport through

• Increased subsidies or tax breaks for EV’s and recharging infrastructure
• Greater spending on freight rail
• Greater spending on public transport.

References

• Federal government is under pressure to cut fuel excise. But will it make any difference at the petrol pump? (ABC, March 2022)
• The Australian Institute of Petroleum (AIP) – price surveys
• Morrison government yet to release 2019 report on vulnerability of Australia’s fuel supplies (Guardian, March 2022)
• Scott Morrison flags tax relief as petrol hits record highs (SMH, Mar 2022)
• Image – SMH