Rising oil prices and electricity costs put immediate pressure on labor
The new Labor government faces an immediate test of its election promise to tackle cost of living pressures as a rebound in the global oil price threatens to swallow petrol price relief due to the reduction of excise duties on fuel and that consumers prepare for an impending spike in electricity bills.
As Russia’s invasion of Ukraine worsens a global energy crisis and intensifies demand for fossil fuels, the flux effects are being felt in Australia amid rising costs for powering coal-fired power plants and gas in the country and the rise in gasoline prices for motorists filling up at the barrel.
The benchmark Brent oil price has rallied to US$117 a barrel over the past week. The last time it was this high was in late March, when average Australian tanker petrol prices topped $2.20 a litre.
The fuel excise tax of 44¢ per liter was cut in half by the former coalition in the March 29 budget, which caused the price of gasoline to drop to $1.60 in April. However, it has since climbed back above $2.20 amid escalating Western sanctions on Russian oil to starve Moscow of revenue it needs to fund the war in Ukraine.
Treasurer Jim Chalmers said Labor could not extend the fuel excise duty cut beyond its initial six-month period, which is due to end on September 28.
However, the Labor Party has pledged to present a federal budget in October, which represents a great opportunity for the government to implement the tax cut if it decides to extend it. The tax cut cost the federal budget about $3 billion.
On electricity prices, Labor cited Reputex analysts’ modeling which showed its plan would replace more expensive coal with cheaper renewables to cut electricity bills by $275 as early as 2025.
On Thursday, Australia’s energy regulator confirmed that the default market supply, which is a price cap on what retailers can charge households and businesses, would rise by 14%, or $227, in New -South Wales; 11%, or $165, in Queensland; and 5%, or $61, in Victoria.