Australian fuel prices have increased due to global crude oil price surges, driven by geopolitical instability in the Middle East, including conflict and the blockade of the Strait of Hormuz. This rise in petrol and diesel costs is projected to impact household and commercial expenses, simultaneously correlating with heightened consumer interest and increased sales of electric vehicles (EVs) across Australia.
Fuel Price Overview
Global crude oil prices have surpassed $US100 per barrel, with some projections indicating potential rises beyond $US150. Economists estimate that Unleaded 91 petrol could increase by approximately 40 cents per litre in the coming weeks.
A 30 percent increase in crude oil prices is calculated to add around $30 to the cost of refuelling a standard 50-litre petrol tank.
Petrol prices have already exceeded $2.10 per litre in some areas. For diesel, currently priced around $1.81 per litre, increases are also noted. Record flooding in northern Australia has also affected fuel supply, contributing to concerns for long-distance drivers. Australia's fuel reserves are reported to be below the International Energy Agency's recommended 90 days.
Financial Impact on Drivers and Vehicles
The increase in fuel prices directly affects the running costs of internal combustion engine (ICE) vehicles.
Each 40-cent rise in petrol cost is estimated to add approximately $4,000 to the running costs of a typical petrol car over a decade.
For heavy vehicles, modelling suggests that an electric semi-trailer becomes more cost-effective than a diesel one if diesel prices reach $2.11 per litre. Should diesel reach $2.41 per litre, the electric truck could be $13,000 cheaper to operate than its diesel equivalent.
EV vs. ICE Total Cost of Ownership
While EVs typically have higher initial purchase costs, their lower running costs can lead to a lower total cost of ownership over time. Modelling comparing a medium-size petrol SUV and its EV equivalent, driven 15,000 km annually for a decade in Australia, indicates that EV owners could begin saving money on fuel after approximately five years, based on an initial petrol price of $2.08 per litre.
A 20 percent increase in crude oil prices, potentially raising petrol to $2.50 per litre, would reduce the time for EV savings to begin by one year. A further increase to $2.90 per litre would reduce this by another year.
Public EV charging rates have reportedly increased to as much as 70 cents per kilowatt-hour, making home charging generally more cost-effective. However, even with these rates, EV charging is often more economical than fueling an ICE vehicle.
EV Adoption Trends and Studies
Research indicates a correlation between higher petrol prices and increased EV uptake. A study across Denmark, Finland, Norway, and Sweden (early 2019 to late 2022) found that a 1 percent increase in petrol prices was associated with a 0.85 percent increase in EV sales. A 20 percent rise in petrol prices could lead to an additional 17 percent increase in EV uptake in these regions.
Similarly, a study in China (2017-2022) observed that an average 1 Chinese Yuan per litre ($0.21/L) increase in petrol price correlated with a 4.67 percent rise in EV sales. These studies suggest that higher gasoline prices are likely to encourage EV adoption in Australia, with cost-sensitive buyers in Nordic countries favoring smaller, cheaper EVs and Chinese buyers opting for fully battery-electric vehicles (BEVs). Rising electricity prices did not deter EV purchases in the Nordic countries during the study period.
For increased fuel prices to have a measurable effect on EV uptake, they would need to remain high for at least six months. Modelling suggests that a 30-50 percent rise in global oil prices, sustained for 6–18 months and resulting in a 40–70 cent per litre increase in Australian petrol and diesel prices, could boost EV sales by an additional 10 percent during that period.
Australian EV Market Response
The Federal Chamber of Automotive Industries (FCAI) reported that electric vehicles accounted for a record 11.8 percent of total sales in Australia in February. While overall EV uptake remains at approximately 2 percent of all cars on the road, monthly figures indicate a positive trend. Top-selling Chinese automakers in Australia, including BYD and Great Wall Motor (GWM) Australia, have reported increases in sales for electric and hybrid cars since the fuel price increases began.
Expert Perspectives and Broader Context
Jon Dee, an EV owner using a home solar energy system, reported incurring no charging costs for his EV, which he drives 200-250km three times a week, and stated his family had not paid a home electricity bill for six months. Paul Maric, co-founder of CarExpert, indicated that while current fuel price increases might not persuade most Australian drivers to switch to EVs, they could serve as a deciding factor for individuals already considering an EV. He also noted that many vulnerable Australians, who often drive older, less fuel-efficient cars, may face challenges affording new EVs, despite some models now costing below $25,000.
United Nations Secretary-General Antonio Guterres has highlighted that dependence on fossil fuels leads to "volatility," suggesting that homegrown renewable energy offers an "exit ramp" due to its affordability, accessibility, and scalability.
Australian Climate Minister Chris Bowen has similarly stated that solar and wind energy sources are immune to interruptions from geopolitical events.
The Role of Chinese EV Manufacturers
Rising fuel costs are prompting Australian consumers to consider Chinese EV brands due to factors like affordability and perceived battery technology reliability. BYD, the world's largest EV manufacturer, entered the Australian market in 2022. China recently became Australia's largest source of new cars in a single month.
Over 10 new Chinese car brands have entered the Australian market since 2020, with four Chinese brands (BYD, GWM, Chery, MG) ranking among Australia's top 10 sellers in the 12 months to February.
Australia is viewed by experts as a 'pressure release valve' and testing ground for Chinese automakers aiming to enter Western markets.
Prime Minister Anthony Albanese has issued a warning to new market entrants, emphasizing the importance of meeting service standards and avoiding 'unfair practices'.