How it unfolded
In recent weeks, Australian households have been grappling with a sharp increase in petrol prices, which have risen by 7% over the past two weeks, climbing from 132.8p to 141.5p per litre. This surge comes at a time when the country is already facing economic pressures, including rising interest rates and inflation.
As of now, regular unleaded petrol prices are nearing $2.30 per litre in major capital cities. This marks a significant increase of more than 50 cents per litre, which is straining budgets for many families. The situation has been exacerbated by the ongoing conflict in the Middle East, which has led to a global increase in oil prices.
Diesel prices have also seen a notable rise, increasing by an average of 18p per litre from 142.4p to 160.3p since the US and Israel initiated strikes on Iran. The impact of these rising fuel costs is being felt across various sectors, contributing to overall inflation, which is projected to reach 4.6% by June 2026, according to Westpac.
At least 50% of the price paid per litre of petrol is attributed to taxes, including VAT and fuel duty, which currently stands at 52.95p a litre. This fuel duty generates approximately £24 billion in revenue for the UK government, highlighting the significant role taxation plays in the overall cost of fuel.
Recent modeling by AMP indicates that the nearly 11 million households in Australia are now facing an additional $80 in monthly petrol costs since the onset of the conflict. This financial strain is compounded by rising mortgage repayments, with households seeing an increase of around $200 due to the rebound in interest rates.
Consumer spending in Australia had already begun to slow early in 2026, as reported by government and Commonwealth Bank data. The last time petrol prices were this high was in August 2024, indicating a troubling trend for consumers who are already feeling the pinch from rising costs.
Experts have voiced concerns over the implications of these rising petrol prices. Dougal Warby remarked, “We’ve seen two drops, two raises, which pretty much brings us back to square one.” Sally Tindall added, “It’s not just a double whammy of a one-two hit in February and March to mortgage rates, it’s the additional pressures coming from rising cost of groceries [and] petrol prices.” Edmund King noted that the global increase in oil prices will likely exacerbate inflation, particularly with the hikes in diesel prices.
Looking ahead, the Reserve Bank of Australia (RBA) is expected to lift interest rates again when its rate-setting board meets in May 2026. The 5p cut in fuel duty introduced during the Ukraine war is also set to be gradually reduced from August 2026. As Michele Bullock stated, “We don’t want to have a recession, but if it’s hard to get inflation down then we’re going to have to deal with that, possibly.” The current state of petrol prices and their implications for the economy are critical for both policymakers and households alike.