The Coalition will introduce the Fuel Price Shield, an automatic safeguard designed to reduce the impact of major global oil price shocks on Australian families and businesses meaning they will pay less at the pump.
Under the Fuel Price Shield, fuel excise would automatically be halved when the two-week average closing price of Brent crude is above US$100 a barrel.
When triggered, the measure is estimated to reduce the tax on fuel by around 27 cents a litre, equivalent to around $15 on a typical tank of fuel.
In addition, the 32-cent-a-litre heavy vehicle road user charge would be set to zero, giving truckies significant direct relief and households and businesses additional indirect relief by lowering prices.
Leader of the Opposition Angus Taylor said sharp rises in global oil prices flow quickly through to household and business costs.
“Fuel is not a luxury. Australians need it to get to work, take the kids to school and keep their businesses running,” Mr Taylor said.
“When global events send oil prices through the roof, Australians should know there is a clear automatic safeguard in place to provide temporary and targeted relief.
“The Fuel Price Shield would provide certainty. When a serious oil shock hits, the tax comes down automatically. When oil prices return to more normal levels, the ordinary rate is restored.
“It takes the day-to-day politics out of the decision and gives families and businesses greater certainty about what will happen when the next global oil shock arrives.
“For a family filling a typical tank, the Fuel Price Shield would mean around $15 staying in their pocket instead of going in tax.”
Leader of the Nationals Matt Canavan said fuel prices have an especially large impact outside the major capital cities.
“In regional Australia you cannot just decide to stop driving. People often travel long distances for work, school, medical appointments and the weekly shop.
“Higher fuel prices also flow through the entire economy. They increase the cost of moving food, freight and supplies around our country.
“The Fuel Price Shield is designed to provide temporary relief when international oil markets experience an exceptional shock, while ensuring the ordinary arrangements return once that shock has passed.”
Shadow Treasurer Tim Wilson said the Fuel Price Shield would give Australians certainty that when global oil prices surge, the government will not simply pocket the windfall.
“The Fuel Price Shield means Australians are protected from global price shocks when they refill,” Mr Wilson said.
“When oil prices soar, fuel excise comes down automatically, helping families and businesses manage the hit to their budgets.”
Shadow Minister for Infrastructure and Transport Bridget McKenzie said the Fuel Price Shield would provide vital protection for truckies, freight operators and regional communities.
“Truckies cannot simply stop driving when oil prices spike. Fuel is one of their biggest costs, and when that cost goes through the roof it flows straight through the supply chain to every supermarket shelf and every small business,” Senator McKenzie said.
“The Fuel Price Shield will protect our transport industry from sudden global oil shocks, with corresponding relief for the road user charge so heavy vehicle operators are not left behind. That means lower pressure on freight costs and lower pressure on prices for Australian families.”
Shadow Minister for Energy and Emissions Reduction Dan Tehan said the Fuel Price Shield was designed to give Australians protection when global oil prices surge.
“Australia cannot control wars, instability or oil shocks overseas, but we can control how our fuel tax system responds when they happen.”
“The Fuel Price Shield would automatically cut fuel excise when oil prices hit the trigger, reducing the tax component of petrol and diesel at the time households and businesses are facing the biggest pressure at the bowser.”
HOW THE FUEL PRICE SHIELD WILL WORK
The Fuel Price Shield would automatically halve the fuel excise and zero out the heavy vehicle road user charge when the two-week average closing settlement price of Brent crude rises above US$100.
All changes would apply from the Monday after the trigger date.
The Fuel Price Shield would initially operate until the earlier of:
- the eight-week average Brent crude price falling below US$100 a barrel; or
- three months passing since the Fuel Price Shield was triggered.
At that point, the temporary excise reduction would end unless the government, following a review of global oil prices and market conditions, decided to extend it.
The policy would also temporarily reduce the heavy vehicle road user charge to zero, giving our truckies an even bigger benefit than the excise reduction.
The rate of heavy vehicle road user charge will be reduced from 32.4 cents per litre to zero cents per litre, meaning truck and bus operators will be able to claim the full 26.85 cents per litre value of the fuel excise back as a Fuel Tax Credit, which can then be used to offset their GST obligations when lodging their Business Activity Statements.
Coalition analysis indicates the Fuel Price Shield would have been triggered only twice in the past five years, during the major global oil price shocks of early 2022 and March 2026.
During those two periods, the Fuel Price Shield would have operated for approximately 6 months and 3 months, respectively.
Fuel Price Shield would put a clear and predictable framework around future decisions, rather than requiring governments to design temporary relief from scratch every time international oil prices surge.
The policy is estimated to cost around $950 million for each month it is activated.
Because the measure only operates during periods of exceptionally high oil prices and automatically switches off, it does not create a permanent reduction in fuel excise revenue.
The current Budget assumes oil prices return to around US$80 a barrel by mid-2027.
The ACCC would be tasked with closely monitoring wholesale and retail fuel prices while the Fuel Price Shield is operating to ensure the reduction in fuel excise is passed through to motorists.
The ACCC would monitor prices, costs and margins across the fuel supply chain and engage directly with fuel wholesalers and retailers on the pass-through of the excise reduction.
Fuel retailers would be expected to pass on the full reduction as quickly as possible as existing stocks purchased at the higher excise rate are replaced.
This approach follows previous fuel excise reductions, where the ACCC closely monitored wholesale and retail prices and the pass-through of lower excise to consumers.
The Fuel Price Shield will sit alongside the Coalition’s broader plan to strengthen Australia’s fuel security and reduce our exposure to disruptions in global supply.
The Coalition has already announced a plan to more than double minimum stockholding requirements to 60 days for critical fuels and establish an $800 million Australian Fuel Security Facility to support more than one billion litres of new fuel storage capacity, with a focus on diesel.
The Coalition will also establish a daily public fuel dashboard so Australians can see fuel supply levels in real time, support investment in new and prospective refining capacity through the Fuel Security Services Payment, and remove barriers to increasing Australian fuel supply.
Together, these measures are designed to deal with both sides of the problem: The Fuel Price Shield provides temporary relief when global oil prices spike, while the Coalition’s fuel security plan increases the amount of fuel and storage available in Australia and strengthens the resilience of domestic supply chains.
The Fuel Price Shield and stronger fuel security are part of our plan to fix our economy and protect our way of life.
