Fuel price Australia: how it handled the 2026 oil shock

Two countries that import most of their fuel

The shock began when the Iran war disrupted shipping through the Strait of Hormuz in 2026. Both countries depend on imports, though in different forms. India's crude oil import dependence was 88.7% in 2025-26⁴. Australia imports about 90% of its refined fuel needs⁵, and has two refineries left. Those are different measures, one of crude and one of refined products.

Their pump prices are built differently too. Australia's fuel excise is a fixed charge per litre, about 52.6 cents before GST on our arithmetic from the 26.3 cent halving. Delhi petrol's price on 1 October included central excise of Rs 11.90 a litre, a dealers' commission and Rs 16.59 of state VAT⁴. A given rise in the crude price therefore moves the two pump prices by different proportions, so the comparison below is of policy choices and outcomes, not a clean experiment.

Stocks differed too. Australia's minimum stockholding cover averaged 37 days of petrol, 32 days of diesel and 30 days of jet fuel in the March quarter¹.

What did each government decide?

Australia acted first on the tax. On 30 March the Government announced a halving of fuel excise for three months from 1 April, cutting costs by 26.3 cents a litre, and a zero heavy-vehicle road user charge⁶. The ACCC describes the 32 cents seen at the pump as that 26.3 cents plus a 5.7 cent equivalent from states and territories giving up GST on fuel⁷. The Treasurer extended the relief at 16 cents a litre from 1 July to 2 August⁸ and it ended at midnight on 2 August. The 12 May Budget added a A$14.8 billion fuel package, including a A$3.2 billion fuel security reserve and a higher stockholding target for diesel and jet fuel⁹.

The cost is reported differently. The ministers put the cost of the first three months at A$2.55 billion¹⁰, and the Budget release gives A$2.9 billion for the excise and road user charge relief⁹. The sources do not agree on a single figure, so we give both.

India chose to hold prices. On 27 March the Petroleum Ministry cut central excise on petrol and diesel by Rs 10 a litre but left retail prices unchanged¹¹, so the cut helped the oil companies' finances rather than lowering pump prices. Delhi petrol and diesel were then raised in four steps from mid-May, reaching Rs 102.12 and Rs 95.20 by 24 to 25 May, and have been unchanged since².

1. 27 March 2026India cuts central excise by Rs 10 a litre with unchanged pump prices.Source 11 (opens the source in a new tab)
2. 30 March 2026Australia announces a three-month excise halving and a zero road user charge.Source 6 (opens the source in a new tab)
3. 12 May 2026Australia's Budget adds a A$14.8 billion fuel package.Source 9 (opens the source in a new tab)
4. Mid to late May 2026India raises Delhi petrol and diesel in four steps.Source 2 (opens the source in a new tab)
5. 2 August 2026Australia's excise relief ends.Source 12 (opens the source in a new tab)

The case against cutting the price

Many economists argued against both approaches, for the same reason: a price held down hides the signal that makes people use less when supply is tight. In Australia the argument came from economists and business groups.

It might be good politics, that's for others to judge, but it's not good economics.

— Saul Eslake, economist, ABC News, 30 March 2026

Analysts disagreed on whether to cut at all, and several said diesel, which feeds freight, farming and mining, was the harder problem than petrol¹³.

What happened in Australia

Prices spiked first. The Bureau of Statistics reported automotive fuel prices up 32.8% in March, the largest monthly rise since the series began in 2017¹⁴. On 24 March more than 500 service stations had run out of at least one fuel¹⁵. Pump prices peaked on 31 March at 257.2 cents a litre for petrol and 322.4 cents for diesel¹⁶, according to ACCC figures summarised by IndexBox.

The excise cut then took effect. By 24 June petrol was 157.1 cents, below its February level, and diesel 180.1 cents, near it¹⁶, as reported. After the relief ended and oil prices rose again, petrol was 236.2 cents and diesel 276.6 cents on 21 October¹, with no relief in place. Stocks on 20 October were 39 days of petrol, 31 of diesel and 28 of jet fuel, against a March-quarter average of 37, 32 and 30¹, so they had not been rebuilt, and 105 of 8,167 reporting sites, about 1.3%, were out of one or both fuels on 23 October¹.

Inflation followed the price. Headline CPI was 4.3% in the 12 months to September, with automotive fuel up 23.6%³. The Reserve Bank expected the excise cut to lower year-ended inflation in April by about 0.5 percentage points¹⁷, a forecast rather than a measured result. The Bank raised its cash rate to 4.60% on 29 September and said it would raise it again if needed¹⁸.

What happened in India

The pump price barely moved, but the costs did. Public-sector downstream oil companies earned a profit after tax of Rs 77,281 crore in 2025-26 and lost Rs 18,150 crore in April to June 2026⁴. The Finance Ministry's September review says the limited pass-through of higher global energy prices helped contain the shock and protect household purchasing power¹⁹. ICRIER estimated in April that holding petrol and diesel prices costs about 0.58% of GDP a year²⁰, an estimate on stated assumptions rather than an outcome.

Demand did not fall. Kpler calls India the clearest exception among major markets on petrol and diesel demand, citing incomplete pass-through²¹. The shortage appeared elsewhere: India's LPG consumption fell 15.5% from April to September, from 16,219 to 13,705 thousand tonnes⁴. Kpler forecasts India's LPG demand falling about 100,000 barrels a day in 2026 and recovering only about 60,000 in 2027²¹. India's consumer price inflation was 5.54% in September²², and the Reserve Bank raised its repo rate to 5.50% on 7 October, noting that the pass-through of high energy prices is still continuing²³.