If you’ve filled up your car lately and felt your wallet wince, you’re not alone.
Petrol prices across Australia are on the rise again, and experts warn we could soon be paying as much as $2.20 a litre at the bowser.
For many of us, that’s a painful flashback to the price spikes of recent years—and it’s not just a local issue.
Global events are sending shockwaves through the oil market, and the ripple effect is hitting Aussie motorists hard.
Why are petrol prices climbing?
The latest surge is being driven by escalating tensions in the Middle East, particularly the ongoing conflict between Israel and Iran.
While Australia doesn’t import oil directly from Iran, we’re not immune to the global oil market’s ups and downs.
The price of Brent crude oil—a key international benchmark—has recently hovered around $US73 per barrel, after spiking to $US77, the highest since January. Some analysts are even predicting it could soar past $US100 a barrel if the conflict drags on.
Tony Sycamore, a market analyst at IG Australia, explains the maths: ‘Each $1 that crude oil goes up generally adds 1 cent to the price of petrol that we pay at the pump.’
So, if oil prices keep climbing, it’s only a matter of time before we see those increases reflected in what we pay to fill up.
How high could prices go?
The national average for unleaded petrol is already sitting at 178.6 cents a litre, but with the current trajectory, $2.20 a litre is looking more and more likely.
AMP chief economist Shane Oliver points out that oil prices jumped 13 per cent in just one week on fears of supply disruptions.
‘The rise so far this month threatens a flow-on of around 12 cents a litre for Australian petrol prices if sustained at these levels,’ he says.
It’s not just a short-term blip, either. While some of the price hikes may be softened by the usual discounting cycles (which can see prices swing by more than 30 cents a litre in major cities), the underlying trend is upward.
Putting it in perspective
It’s worth noting, as Janus Henderson’s Oliver Blackbourn does, that oil prices have been bouncing between $70 and $90 a barrel throughout 2024.
While the current spike is concerning, it’s still below the eye-watering levels seen after Russia’s invasion of Ukraine in early 2022, when oil shot above $100 a barrel.
But with the world as unpredictable as ever, there’s no guarantee we won’t see those highs again.
What does this mean for interest rates?
Here’s where things get even more interesting—and potentially worrying for anyone with a mortgage or looking to borrow.
The Reserve Bank of Australia (RBA) keeps a close eye on inflation, and petrol prices are a big part of the inflation basket.
If fuel costs stay high, it could push up inflation and force the RBA to delay any plans to cut interest rates.
IG Australia warns that persistent high fuel prices could see central banks, including the RBA, take a more cautious approach.
In other words, if oil-driven inflation sticks around, those long-awaited rate cuts might be pushed further into the future.
Treasurer Jim Chalmers acknowledges the risk, saying, ‘Higher oil prices do pose a risk to the inflation outlook but they also pose a risk to global growth.’
He adds that central banks typically try to ‘look through’ temporary price spikes, but if the increases are sustained, it could be a different story.
What can you do?
Unfortunately, there’s no magic wand to wave away higher petrol prices. But there are a few things you can do to soften the blow:
Shop around: Use fuel price apps or websites to find the cheapest petrol in your area. Prices can vary significantly from one suburb to the next.
Time your fill-ups: Petrol prices often follow weekly cycles, peaking and then dropping. Try to fill up when prices are at their lowest.
Drive smarter: Simple changes like reducing your speed, avoiding heavy acceleration, and keeping your tyres properly inflated can improve your fuel efficiency.
Consider alternatives: If you’re in the market for a new car, it might be time to look at hybrids or electric vehicles, which are less affected by petrol price swings.
The bigger picture
Rising petrol prices don’t just hit our wallets at the pump—they can also push up the cost of goods and services across the board, as transport costs rise for businesses.
That means everything from groceries to online shopping deliveries could get more expensive.
And for those on fixed incomes or tight budgets, these increases can be especially tough. If you’re feeling the pinch, it’s worth reviewing your household budget and seeing where you can make adjustments.
Have your say
Are you already feeling the impact of rising petrol prices? Have you changed your driving habits or found clever ways to save at the bowser?
We’d love to hear your tips, tricks, and stories—share your thoughts in the comments below and join the conversation with other YourLifeChoices members.
Let’s help each other navigate these challenging times—because when it comes to the cost of living, every little bit counts.
Also read: Experts push to end $250 million tax loophole fuelling oversized vehicle surge
