Australian motorists are bracing for a substantial increase in fuel costs from July 1, 2026, as the federal government’s temporary fuel excise cut is set to expire. The measure, which slashed 26 cents per litre from the fuel tax, was introduced to ease the burden of soaring global oil prices. Its cessation is now predicted to drive petrol prices up by as much as 40 cents per litre and diesel by 65 cents per litre in some regions.
The imminent price hike, confirmed by industry analysis this week, means that the average price for unleaded petrol in Sydney, for example, could reach $1.99 per litre, while diesel could climb to $2.37 per litre. This comes despite recent trends showing a global fuel price retreat, with average unleaded 91 prices at tracked Costco fuel stations falling to $1.584 per litre by June 10, 2026, and diesel dropping to $1.936 per litre.
The End of a Temporary Relief
The temporary halving of the fuel excise was a $2.5 billion initiative by the Australian government, enacted in response to global oil market volatility triggered by geopolitical events. However, the government has given no indication that it intends to extend these measures beyond the June 30 deadline. This means the full excise will be reinstated, directly impacting the price at the bowser across the nation.
According to the Australian Institute of Petroleum (AIP), the national average petrol price for the week ending June 7 was 174.9 cents per litre, with diesel at 213.7 cents per litre. These figures reflect prices with the current excise reduction in place. Once the full excise is applied, consumers will absorb the additional 26 cents per litre, plus any flow-on effects from retailers and market dynamics.
“Based on current prices, the average for unleaded petrol in Sydney in July will be 40 cents higher than before the start of the United States and Israel’s war with Iran, at $1.99 per litre. Diesel would be 65 cents higher at $2.37 per litre.”
Regional Impact and Price Volatility
While national averages provide a general picture, the actual impact will vary by state and even within different regions of a state, influenced by local supply, demand, and retail competition. Cities like Sydney, Melbourne, and Brisbane have experienced significant reductions in unleaded petrol prices since March, with averages falling by at least 89 cents per litre from their peak after initial global conflicts. However, these gains are now set to be reversed.
For diesel users, the increase is projected to be even steeper. Diesel prices, which do not experience the same retail price cycles as petrol, had seen a more consistent decline in recent weeks. For instance, Costco’s average diesel price fell by 31 cents per litre (13.9%) in the 30 days to June 10, reaching $1.936 per litre. The reintroduction of the full excise will add a substantial cost, pushing these prices significantly higher.
What This Means for Australian Households and Businesses
The impending fuel price jump will place renewed pressure on household budgets, particularly for those in regional areas with limited public transport options, and for businesses reliant on road transport. This comes at a time when many Australians are already navigating broader cost-of-living pressures.
For those considering the switch to electric vehicles (EVs), the rising cost of traditional fuels further highlights the long-term economic advantages of electrification. While the upfront cost of an EV can be higher, the running costs, particularly with home charging and solar integration, offer substantial savings. The average cost to charge an EV at home in Victoria is around 26.8 c/kWh, significantly lower than the per-kilometre cost of petrol.
| Fuel Type | Current Average (June 10, 2026) | Projected Average (July 2026, Sydney) | Increase per Litre (approx.) |
|---|---|---|---|
| Unleaded 91 | AUD $1.584 | AUD $1.99 | AUD $0.40 |
| Diesel | AUD $1.936 | AUD $2.37 | AUD $0.65 |
Note: Current averages are based on Costco data for Unleaded 91 and Diesel. Projected averages are NRMA estimates for Sydney.
Households are encouraged to reassess their fuel consumption habits and explore alternative transport solutions where feasible. For businesses, the increased operational costs will likely be factored into pricing, potentially contributing to broader inflationary pressures.
While the focus remains on petrol and diesel, the broader energy landscape continues to evolve. Recent announcements from the Essential Services Commission (ESC) in Victoria, for example, indicated a reduction in the Victorian Default Offer (VDO) for electricity by an average of 5% for residential customers from July 1, 2026, saving households approximately $84 annually. These contrasting movements in energy prices highlight the complex and dynamic nature of Australia’s energy market.
For those looking to mitigate rising transport costs, exploring EV options, including understanding charging infrastructure and available models, can be a strategic move. From Petrol to Plug: The Ultimate First-Time Buyer’s Guide to Switching to an EV in Australia 2026. Additionally, smart energy management at home can help offset other rising costs. Smart Home Energy Systems: Slash Your 2026 Australian Electricity Bills by Up To 30%.
As the June 30 deadline approaches, motorists and businesses should prepare for a noticeable impact on their operating expenses.