Updated ,first published
Independent service stations are slashing unleaded petrol to as low as $1.90 a litre and diesel to less than $2.95 after news of the Iran war ceasefire last week spurred a swift fall in global oil prices, now flowing through to Australia.
The average price for unleaded petrol has dropped below $2.10 a litre in Melbourne and Sydney for the first time since the Iran war started on February 28, choking off oil shipments from the Middle East.
Prices are falling across all service stations in Sydney and Melbourne, but independents are cutting faster and deeper than major fuel retailers, now under pressure from motoring groups to pass on savings.
Oil prices have soared since February 28 when Iran blockaded the Strait of Hormuz and disrupted about 20 per cent of the supply of oil. Australian petrol prices, which rise and fall in line with crude oil markets, have risen more than 30 per cent in less than seven weeks to record highs above $2.50 a litre.
However, the price of a barrel of oil dropped 15 per cent last week to below $US91 ($127), after US President Donald Trump agreed to a ceasefire deal with Iran, raising hopes that Australia’s fuel price pain had peaked.
While oil markets remain volatile as the conflict in the Middle East continues without a clear timeline for resolution, National Roads and Motorists Association spokesman Peter Khoury said the recent drop in global oil prices was now flowing through to Australia.
“What we’re seeing is the wholesale prices in Australia start to reflect what happened with oil prices a week ago, and it takes … about that time for them to flow on,” Khoury said.
“Things are volatile and they can change pretty quickly, but based on the figures that we have seen today, prices are falling.”
Independent service stations have been the first to react, putting pressure on larger fuel retail chains to follow suit, Khoury said.
“We’re starting to see independents do what independents do, which is competing on price,” he said.
“We need to see all service stations dropping their price, not just the independents.
“Those who went up first when the war began, should be the ones to fall the fastest and, if they haven’t fallen, they should start to fall now.
“This is something the ACCC [Australian Competition and Consumer Commission] absolutely needs to monitor as the NRMA is doing.”
An ACCC spokesperson said the agency was monitoring fuel markets and it encouraged motorists to use the free fuel price websites and apps to find the cheapest prices.
Fuel prices are set by market conditions, but the consumer law prevents companies from colluding to set prices.
“Businesses must not engage in anti-competitive conduct. They must make all of their pricing decisions independently of their competitors,” an ACCC spokesman said.
Treasurer Jim Chalmers has granted the ACCC extra powers to monitor fuel prices.
“We’ve been very clear that petrol stations cannot use this war as an excuse to take motorists for mugs,” Chalmers said.
While the shift toward peace in Iran has started dragging oil and fuel prices down from historic highs, analysts and Australian fuel industry leaders warn that even a swift resolution to the conflict would fail to bring local petrol and diesel prices all the way back to their pre-war ranges of between $1.66 and $1.80 a litre for several months.
Even once shipping traffic returned to the Strait of Hormuz, energy flows would take months to return to normal, experts said, while oil production, refining and storage infrastructure in the Persian Gulf had been badly damaged and needed repair.
“The saying about fuel prices is they are quick to go up and slow to come back down,” said Jon Berry, geopolitics lead at KPMG. Although benchmark oil prices were back in the sub-$US100 range for now, “it takes time for that to wash through,” he said.
The price drops on Friday follow a fire at the Geelong refinery, one of two remaining fuel-production facilities in the country, and support assertions from the Albanese government and the plant’s owner, Viva Energy, that the disruption to production would not raise prices at the bowser.
“A fire in a refinery in Geelong does not affect petrol prices, they’re affected by global issues, and we know that because gas oil, our benchmark price for diesel, fell again last night,” Khoury said.
Running at maximum capacity and processing 120,000 barrels of crude oil a day since the war began, the Geelong refinery typically supplies enough petrol, diesel and jet fuel to cover 50 per cent of Victoria’s demand, and 10 per cent of Australia’s.
Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.
Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.
Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.