Australia Extends Fuel Excise Cut at Reduced Rate

The federal government has extended its cut on the fuel excise but at a smaller discount.

The 32 cents per litre cut will drop to 16 cents per litre and the Heavy Vehicle Road User Charge will increase to 16 cents per litre.

Both temporary measures were originally set to expire on June 30 but will now be dropped back between July 1 and August 2, before tapering off completely.

However, Prime Minister Anthony Albanese would not rule out another extension of the discount beyond July.

Here's what we know.

Why has it been extended?

The federal government halved the fuel excise in March to buffer the impact of rising oil prices in the wake of the US-Israeli attack on Iran, and subsequent disruption to shipping through the Strait of Hormuz.

On Sunday, Mr Albanese said the government welcomed the end to the war in the Middle East, and the subsequent substantial drop in fuel prices as a result.

But, he said Australians were still under pressure.

"The 16 cents a litre extension to the fuel tax cut that we've announced today will reduce the cost of a 65 litre tank of fuel by around $11," he said.

Mr Albanesewarned that it could take several months for fuel costs to return to "normal" due to the ongoing effects of the closure of the Strait of Hormuz.

Today, Iran said it had closed the Strait of Hormuz because of Israel's continued attacks in Lebanon, but the US says traffic is continuing to flow.

The US military said 55 merchant ships transited on Saturday, local time, with more than 17 million barrels of oil.

What is the fuel excise?

The federal government halved its excise on petrol and diesel for three months after major disruptions to the fuel supply chain and a subsequent shortage.

It reduced fuel costs by 26.3 cents per litre.

Once implemented, prices that rose to about $3 per litre for diesel in some capital cities began to fall significantly.

Australian retail diesel prices were down 31 per cent and petrol prices down 29 per cent for the five largest cities as of May 27.

The fuel excise is a sales tax levied by the government on petrol and diesel.

It is paid wholesale by the fuel importer and seller and then passed on to consumers at the pump.

It is indexed twice a year.

The standard fuel excise is 52.6 cents per litre, according to the Australian Automobile Association.

How much will fuel prices go up on July 1?

Prices will go up by 16 cents per litre until August.

The original cut to the fuel excise of 32 cents per litre saved about $23 per tank.

The new 16 cents per litre discount will save about $11 on a standard 65-litre car.

The changes mean prices are set to jump slightly but experts told the ABC earlier this month that it shouldn't be a dramatic jump.

"Even with the return to higher excise, the retail cost of petrol won't be way out of line with historical levels, at least in inflation-adjusted terms," University of Queensland economics professor John Quiggin said.

What about supply?

As of June 16, Australia has in reserve:

44 days of petrol

39 days of diesel

32 days of jet fuel.

A reported 3.9 billion litres of crude, diesel, jet and petrol is scheduled to arrive from overseas in the next four weeks. Some of this is already on ships in transit and some is awaiting departure.

How do I shop around for fuel?

The Australian Competition and Consumer Commission urges consumers to shop around for fuel and consult with fuel apps and websites in their state: