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FUEL FOR THOUGHT

Your petrol questions answered

Most of us rely on petrol to power our vehicles, but do we really understand what we’re paying for at the bowser? Words: Jeremy Rochow

Like electricity, gas and running water, petrol is a part of everyday life. But for a commodity that costs Northern Territory motorists an average of $76.06 a week (according to the AAA Affordability Index Report), many of us know very little about what goes on beyond the bowser. From excise tax to price fluctuation, we answer some common fuel-related questions to help you find out what you’re really paying for at the pump.

What drives unleaded petrol prices?

Did you know that you pay close to 40 per cent in taxes when you fill your car with unleaded petrol?

The biggest tax is the fuel excise, which is currently 41.6 cents per litre – we’ll explain a little bit more about that later. On top of that, you pay a 10 per cent Goods and Services Tax (GST). Taxes aside, the largest component of the retail price of petrol, accounting for almost 50 per cent, is the international price of refined petrol known as Singapore Mogas 95. The cost of Mogas 95 varies depending on a range of factors, including the price of crude oil and the strength of the Australian dollar. The combined cost of Mogas 95 and taxes makes up about 84 per cent of the retail price of petrol. The rest goes to refiners, wholesalers and retailers to cover their costs and make a profit.

What is the fuel excise?

With the exception of registration and heavy vehicle charges, motorists don’t directly pay to use the roads. Instead, we pay a fuel excise tax whenever we buy petrol or diesel. The tax is currently 41.6 cents per litre.

According to the Australian Automobile Association (AAA), four out of five motorists are unaware they pay more than 40 per cent in tax each time they fill up. Most of us have paid the tax for our entire lives, with the fuel excise introduced in Australia in 1929 when oil refineries were first established. Fuel excise is now one of the federal government’s largest sources of transport-related revenue. It also fluctuates, with the rate indexed twice a year to align with the consumer price index (CPI).

Where does the revenue go?

Each year the average NT motorist pays $1760 in fuel excise, however, the federal government only sets aside a fraction of this revenue for repairing our roads. The rest goes towards general revenue. While motorists make a significant contribution to government revenue through the fuel excise, only some of it is used to improve transport infrastructure.

Australian motorists agree money raised from the fuel excise should be used to maintain the nation’s roads, with an AAA survey finding a third of road users believe 100 per cent of the tax should be spent on land transport projects.

How will the rise of electric vehicles impact the fuel excise?

The federal government might not be able to rely on the fuel excise in the future. Each year, more fuel efficient vehicles enter the market, with electric and hybrid vehicles becoming increasingly popular. Many of these vehicles require little-to-no petrol, decreasing the amount of revenue raised at the pump.

Motorists already pay different prices to use the same roads, depending on the type of car they drive. Older petrol-guzzling vehicles cost far more to fill up – and are taxed more – than newer, more economical cars.

The increase in people purchasing electric vehicles will only further the price divide, as road users who no longer purchase petrol won’t be paying the excise at all. Car companies are moving towards selling more electric vehicles as well. Volvo predicts that 50 per cent of its sales will be electric by 2025, while other manufacturers aim to sell one million electric vehicles by the same year. If in a few years, there is a big take up on electric vehicles, a significant hole may form in the federal government’s budget.

How can I save on fuel?

In 2017 the Northern Territory Government introduced a mandatory real-time fuel pricing program called MyFuel NT. The legislation stipulates that all fuel retailers must provide real-time prices for their fuel, which can then be published on websites and apps. MyFuel NT has helped with petrol price transparency and competition in the Northern Territory’s retail fuel market. This allows motorists to readily compare petrol prices and find the cheapest fuel, whether it’s in their local area or any region across the NT.

Here are a few other ways to save a few dollars on fuel.

• Don’t be a rev head: avoid over revving if you’re driving a manual. In an automatic, ease back slightly on the accelerator once the car gathers momentum.

• Avoid speeding: fuel consumption increases significantly over 90km/h. At 110km/h your car uses up to 25 per cent more fuel than it would at 90km/h.

• Maintain your vehicle: service your vehicle regularly and check your tyre pressure at least once a month.

• Leave it on: don’t turn your engine off when you’re stopped at the traffic lights, unless your car is programmed to do so.

 

 

 

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