California
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29.7 ° C
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California
broken clouds
29.7 ° C
31.2 °
27.6 °
77 %
2.1kmh
75 %
Sun
35 °
Mon
37 °
Tue
36 °
Wed
36 °
Thu
26 °
Saturday, July 13, 2024

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Petrol prices are about to jump up. Here’s why


It’s best you fill up before the start of next month, because petrol prices are about to jump suddenly.

The cost at the bowser is going to climb for two reasons, one domestic and one from overseas.

Treasurer Jim Chalmers has ruled out an extension to the fuel tax excise cut. (Dylan Coker / SMH)

And the Organisation of Petroleum Exporting Countries (OPEC) has agreed to cut production by 100,000 barrels a day.

Both of these decisions are going to cause petrol prices to shoot up.

Why is the petrol excise cut expiring?

The reason for the petrol excise going back to its regular price is simple – money.

The federal government draws in a substantial amount of money from the excise (which is another name for a tax), which is usually 44 cents a litre. But since March 30, the government has been collecting half that.

And while it sucks to pay an extra 25 cents a litre in October than you did in September, the reality is the petrol excise is a big part of the federal budget.

If you weren’t paying the petrol excise, odds are the federal government would be collecting that money from you from somewhere else, like a rise in income taxes or the GST.

The money from the excise goes into the general kitty for the federal budget, rather than funding something in particular.

Petrol prices have remained stubbornly high for months.
Petrol prices hit a peak several months ago, but have been dropping since. (Eddie Jim)

When does the petrol excise cut expire?

The petrol excise will go back to its full price on September 29 this year.

Which means all other things being equal, prices will jump 25.3 cents overnight.

This means the price is slightly more than doubling – the excise rises twice a year based on movements in the consumer price index.

Why is OPEC cutting production?

OPEC is cutting production for the same simple reason – money.

By reducing the amount of oil they pump out, they will cause the price to go up.

The 100,000 barrels a day they won’t be drilling is not a substantial amount, just 0.1 per cent.

But they are hoping the cut to supply will halt the decline of oil prices which has been going on for a few months now.

This comes despite the pleas of the United States, who had begged OPEC to boost production to lower prices.

But the higher the prices, the more OPEC makes.

Nigeria

The most expensive and cheapest countries on Earth for petrol

OPEC is an intergovernmental organisation of 13 member countries that account for 81 per cent of “proven” oil reserves.

Because of their control of supply, OPEC can operate a cartel with impunity.

And unfortunately, most of the countries in OPEC are ones that don’t have great relationships with Australia.

The countries in OPEC are Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela.

The associated oil producing nations of Azerbaijan, Bahrain, Brunei Darussalam, Kazakhstan, Malaysia, Mexico, Oman, Philippines, Russia, Sudan and South Sudan will also cut production in line with OPEC’s decision.

OPEC operates a cartel with their coordinated control of the oil markets. (AP/AAP)

Why can’t non-OPEC countries drill more oil?

There’s nothing stopping countries that aren’t in OPEC from drilling more oil.

But for many of the non-OPEC nations, governments can’t instruct the oil companies to produce more.

And when prices of oil go up, there’s not much incentive for Shell or BP to drill so much the prices go down again.

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