Fuel for thought: your questions answered

Posted 16 May, 2019 Jeremy Rochow

The majority of us rely on petrol to power our vehicles, but do we really understand what we’re paying for at the bowser?   Like electricity, gas and running water, petrol is a part of everyday life. But for a commodity that costs South Australians an average of $85 a week (according to the AAA Affordability Index Report), many of us know very little about what goes on beyond the bowser. From excise tax to price fluctuation, we answer some common fuel-related questions to help you find out what you’re really paying for at the pump.  

What drives unleaded petrol prices?

Did you know that you pay close to 40% in taxes when you fill your car with unleaded petrol? The biggest tax is the fuel excise, which is currently 22.1 cents per litre – we’ll explain a little bit more about that later. On top of that, you pay a 10% Goods and Services Tax (GST).   Taxes aside, the largest component of the retail price of petrol, accounting for almost 50%, is the international price of refined petrol known as Singapore Mogas 95. The cost of Mogas 95 varies depending on a range of factors, including the price of crude oil and the strength of the Australian dollar. The combined cost of Mogas 95 and taxes makes up about 87% of the retail price of petrol. The rest goes to refiners, wholesalers and retailers to cover their costs and make a profit.    

What is the fuel excise?

With the exception of registration and heavy vehicle charges, motorists don’t directly pay to use the roads. Instead, we pay a fuel excise tax whenever we buy petrol or diesel. The tax was 44.2 cents per litre until the Federal Government halved it in March to ease motorists’ pain at the pump. Thanks to the reduced excise, motorists will save roughly $15 a litre when filling a 60-litre tank with unleaded. However, the Federal Government stands to lose $2.65 billion in excise revenue over the next six months, according to the Australian Automobile Association (AAA).     Most of us have paid the tax for our entire lives, with the fuel excise introduced in Australia in 1929 when oil refineries were first established. Fuel excise is now one of the Federal Government’s largest sources of transport-related revenue. It also fluctuates, with the rate indexed twice a year to align with the consumer price index (CPI). The AAA offer a fuel excise calculator, which also offers a fuel versus electric vehicle comparison.