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Motorists face higher fuel prices as excise cut ends but farmers, trucking industry expect relief

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Truck drivers are eagerly awaiting the reinstatement of the fuel tax credit this week.(ABC News: Giulio Saggin)

Key points:

  • A temporary halving of the fuel excise ends this week, driving up fuel prices at bowsers

  • Truck operators say changes to fuel tax credits as a result will help their businesses

  • Farmers will be paying double the current excise again but receiving double the tax credit so the effect is neutralised

A temporary cut to a government fuel tax ends this week, but industry figures say the ensuing price rises will not necessarily be bad news for farmers and truck drivers.

The fuel excise was halved earlier this year in response to the increasing cost of living.

It is expected petrol and diesel prices will steadily increase by 25.3 cents per litre when the cut ends.

But there are signs of a reprieve for some users, with the changes to mean different things for farmers and truck operators.

While fuel became cheaper when the excise was cut, the fuel tax credit the trucking industry relied on reduced to zero.

Australian Trucking Association chairman David Smith said the tax credit was used to offset running costs.

"Without that fuel tax credit, it's very, very difficult in our world because we've actually had to find that money out of cash flow," Mr Smith said.

"It's certainly been a hard slog the last six months.

"If you weren't able to pass that cost on, I doubt you'd be in business today."

These costs were passed down the supply chain, but getting access to the tax credit again will not make transporting goods cheaper.

Vehicle registration prices have risen around three per cent and the road user charge has gone up too.

"It's a necessity basically to be able to pass that cost on to remain in business, to remain viable," Mr Smith said.

Tax 'neutralised' for farmers

However, the increase in the fuel excise and fuel tax credit may be less exciting for farmers.

When the fuel tax credit for truck operators reduced to zero, it reduced to 23 cents for farmers.

Farmers use a lot of diesel to run heavy machinery on their properties.(ABC News: Ian Cutmore)

While the fuel excise will increase this week, CEO of the Australasian Convenience and Petroleum Marketers Association Mark McKenzie said farmers would be able to offset it by claiming an additional 23 cent per litre fuel tax credit.

"So prior to midnight this Wednesday, effectively, farmers are paying 23 cents per litre excise, and they're getting a fuel tax credit of 23 cents per litre," Mr McKenzie said.

"After midnight on the 28th they'll be paying 46 cents a litre but they'll equally be getting an increased fuel tax credit of 46 cents a litre. So in effect, the tax continues to be neutralised."

Lower prices could lie ahead

Mr McKenzie said there could be further relief, with suggestions oil prices could fall between 10 and 15 per cent from current levels.

"Importantly, it's already fallen $40 a barrel from the highs of $130 in March … so if we see that continue we could expect that we might be seeing prices around $80 a barrel by the end of the year," he said.

"We're seeing a lot of people talk about a global recession, and that tends to dampen demand for oil and oil products like diesel.

"So as a result, at the moment, most of the markets are saying that the fuel price outlook and the diesel price outlook in the near term is likely to be fairly benign … these prices are likely to stay where they are or slightly declined."

Supply, demand prop up diesel prices

Mr McKenzie said diesel was cheaper to refine than petrol, however diesel prices had been as much as 50 cents per litre higher than petrol in recent weeks.

"What we've seen globally is … much stronger demand for diesel," he said.

Mr McKenzie said that could be seen in the high number of new diesel-powered cars hitting Australian roads.

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