Fuel prices are set to jump by 25.3 cents a litre towards the end of the month when the government's fuel excise cut comes to an end.
It comes as cost-of-living pressures continue to increase and fuel prices have been at their highest in real terms in 14 years.
The situation could get worse before it gets better as Europe is in the midst of an energy crisis prompted by the war in Ukraine.
There's a lot to unpack. Let's see how we got here.
What is a fuel excise? What happened when it was cut?
Way back in March the previous Coalition government halved the tax charged on each litre of fuel sold in Australia by 22.1 cents.
This temporary move was aimed a lowering fuel costs and easing cost-of-living pressures.
But fuel prices continued to rise. Prices increased by 48 cents a litre for unleaded petrol and 57 cents for diesel by June, according to the Australian Competition and Consumer Commission (ACCC).
Since June, fuel prices have steadily declined.
By early September average retail petrol prices dropped between 50 and 44 cents a litre in the capital cities, according to the ACCC.
Diesel dropped between 33 and 28 cents a litre in the same period.
All up, the six-month measure is expected to cost the government about $3 billion in lost revenue.
When does the fuel excise end?
The fuel excise cut is due to end on September 29.
When that happens fuel prices will rise by 25.3 cents a litre due to indexation and the GST.
What has pushed fuel prices up?
There are a lot of factors at play.
Basically, COVID-19 restrictions easing across the globe, production cuts by large oil-producing countries and sanctions on Russia following its invasion of Ukraine all played a part in pushing fuel prices up.
The ACCC found that prices increased for a sixth consecutive quarter up until June with average petrol prices in the five largest capital cities reaching $1.88 a litre.
That's the highest petrol prices have been in real terms since September 2008, when average prices in 2021-22 dollars were $2.06 a litre.
At the same time diesel prices were 19.3 cents a litre higher than petrol because of high international prices.
Motorists were paying an average of $2.07 a litre for diesel in the June quarter, which was a jump of 21.9 cents on the March quarter.
Why is the price of diesel so important?
Only 26.4 per cent of Australian vehicles run on diesel.
But the price of diesel has wider implications for the economy.
Unlike petrol, diesel is a popular fuel of industry which powers agriculture, shipping, transport, and some electricity generation.
"If you want to talk economics, diesel is an inelastic good. That's it. Oil companies know you need diesel, it's a lifeline," said Macquarie Business School energy economist Dr Lurion De Mello.
He said higher diesel prices can have flow on effects on goods and services Australians rely on.
For example, about 80 per cent of energy used by agriculture is from diesel.
So, climbing prices can flow through to the products in your supermarket, especially when the trucks that transport the goods run on diesel.
"Diesel is an industrial fuel, when the economy opened back up in October 2021 the demand for diesel surged by an enormous amount," Dr De Mello said.
"It has a big bearing on prices."
OK. Where does the European energy crisis come into play?
Russia is one of the world's largest oil producers and it also supplied Europe with about 40 per cent of its natural gas in 2021.
Western sanctions on Russia have seen energy prices and inflation surge.
Moscow has slashed gas supplies and caused gas shortages on the continent.
Dr De Mello said this could mean Australians may face more cost-of-living pain as Europe faces its first full winter since the chaos caused by the invasion of Ukraine.
"My biggest worry in the next six months is that given the high gas prices in Europe some manufacturing facilities that rely on gas are actually switching to diesel," Dr De Mello said.
"So, demand for diesel is going to creep up even more and that's going to put pressure on supplies and that's going to keep prices really high.
"Given that Europe is going into winter and they are really thirsty for energy to keep their homes heated. I think a lot of diesel is going to flow into Europe."
So, where do I find the cheapest fuel?
But with prices set to rise when the fuel excise cut ends in two weeks, Dr De Mello said consumers need to shop around for the cheapest fuel.
He said that's one of the few ways consumers can pressure retailers to keep prices low.
"You really need to shop for fuel like you're shopping for a bed or a fridge," he said.
He said price variations across the same city can be dramatic.
"If you look at the fuel apps, it varies anything between 50 and 80 cent price difference," Dr De Mello said.
ACCC Chair Gina Cass-Gottlieb urges people to shop around to navigate the price fluctuations.
"Shopping around and using fuel price apps can help consumers find the cheapest petrol in their area," Ms Cass-Gottlieb said in a statement.
"Our previous research has shown that buying at independent retailers and avoiding the top of the petrol price cycle in the five largest capital cities can save motorists a lot of money."
