‘Hard to explain’: petrol prices surge back to near record highs

National petrol prices have jumped by 25c a litre over the past three months to be back within striking distance of the peaks recorded in 2022.

Petrol prices are back near their record levels recorded after Russia’s invasion of Ukraine. Picture: NCA Newswire / Nicki Connolly

National petrol prices have jumped by 25c a litre over the past three months to be back within striking distance of the peaks recorded at the time of Russia’s invasion of Ukraine in 2022.

The latest figures from the ­Australian Institute of Petroleum show the average price for unleaded fuel reached 206.7c last week, or just 6c shy of the record high of 212.5c a litre briefly registered in March 2022 just weeks after the start of the Ukraine conflict.

The typical family using 35 litres of fuel is now paying $72 a week – or 50 per cent more than three years ago – while a household burning through 50 litres of fuel has a weekly bill of $103.

The evidence of ongoing cost of living pressures comes ahead of crucial inflation data on Wednesday that has the potential to further erode hopes the Reserve Bank will deliver its first interest rate cut later this year.

Financial markets are pricing in only an 80 per cent chance of a rate cut by the end of this year, after evidence of a reacceleration in inflation in the United States sparked worries that central banks will need to hold rates higher for longer.

AMP chief economist Shane Oliver said he expected the May budget would reveal a second surplus in the vicinity of $20bn for 2023-24, against the small deficit predicted in December.

Dr Oliver said the government needed to be careful that any additional spending did not make it harder to tame inflation.

“This is a time when the budget should be contractionary, and when you look at the actual policy decisions since MYEFO (the mid-year economic and fiscal outlook), I suspect it will look like a stimulus once you add in the additional subsidies, cost of living relief, and some spending associated with Made in Australia,” he said.

The consensus view among economists is that Australian ­Bureau of Statistics figures on Wednesday will show inflation slowed from 4.1 per cent in the year to December to 3.4 per cent in March.

While the slowdown will be welcome news, analysts warned that evidence of ongoing price pressures in areas such as rents, health and services more broadly would cause some concern to the RBA ahead of its May 6-7 board meeting.

ANZ senior economist Catherine Birch said “the two real concerns about inflation are the housing sector – rent and construction costs for new builds”.

“Hopefully any additional cost of living relief we see in the budget is quite targeted to those who really need it, rather than broad based,” Ms Birch said.

The soaring price of fuel two years ago led the government to announce a six-month halving of the fuel excise in an effort to ­provide relief to families in what was considered to be a temporary spike in global energy costs ­following the start of the war in Ukraine.

Instead, prices have not returned to previous levels, as ongoing supply issues have led to fattening margins for refiners, and the recent high prices have not ­renewed calls for government ­intervention.

“It is very hard to explain the current level of petrol prices, you can’t explain it by where world oil prices are,” Dr Oliver said.

Instead, he said it was likely that motorists were paying for the fatter profit margins being enjoyed by the mostly foreign refiners as they struggle to meet demand for their services.

Motorists nationally have suffered a higher average weekly fuel price on only six occasions.

More timely data from Motormouth shows Brisbane drivers were paying 231c for a litre of unleaded petrol on Monday, while pump prices in Sydney and Melbourne were around 220c.