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The global oil shock is upending Labor’s preparations for a critical budget, casting doubt on plans to tax drivers of electric vehicles and raising the prospect of fuel excise relief as Prime Minister Anthony Albanese moves to assure anxious Australians that regular fuel shipments continue to arrive.
Three senior Labor sources said they could delay a move to create a national road user charge, endorsed at last year’s productivity roundtable, as it would levy EV drivers currently exempt from fuel excise at a time when ministers wanted more Australians to switch from combustion engines.
Treasurer Jim Chalmers has been working on ambitious plans to reduce government spending, reform taxes and drive down inflation, but sky-high petrol prices have caused Labor to delay many of these decisions as the government refuses to rule out a cut to the fuel excise tax.
Opposition Leader Angus Taylor opened a debate on the excise on Friday, calling for a temporary halving of the 50¢-a-litre levy that would cost the budget $1.5 billion over three months. He was facing private calls this week from his own MPs to get involved in the fuel debate, as One Nation made headlines with its own demands to ration fuel and cut the tax, a move many economists say would be inflationary.
Albanese attacked Taylor for proposing the government pause its home battery subsidy to pay for the fuel relief. Crucially, the prime minister did not criticise the substance of the policy proposal, as his government ponders emergency relief measures should living costs rise sharply.
The shifts on fuel excise and road charges underline the extent to which the global panic on oil supply is knocking ministers off course.
The government has raised hopes of major tax reform on winding back negative gearing, cutting the capital gains tax discount and finding large savings.
While Chalmers says the global crisis creates only more incentive for big-ticket reforms, the government is waiting to assess the economic carnage and test the mood of voters as inflation is tipped to rise above 5 per cent.
On Friday, Albanese warned of the “massive global economic impact” of the Middle East conflict, pushing back on US President Donald Trump’s second swipe about Australia’s lack of military involvement.
“Australia wasn’t consulted before this action was undertaken,” Albanese said, as he repeated his suggestion that Trump should end the war after badly damaging Iran.
“We are an important ally of the United States. But we do want to see a de-escalation.”
The road user charge, which would be a significant reform win for Chalmers, was a key point of consensus out of Chalmers’ economic roundtable last year. There has been speculation the measure could be unveiled in the budget as Chalmers looks for more revenue to fund tax breaks to spur business investment.
But senior government figures are worried the charge could send the wrong signal on EV uptake. The matter is not yet settled. Some MPs are worried about a brawl with the Greens, the Liberals and state governments.
Others say the Nationals support the policy, which the Productivity Commission says is critical for maintaining revenue as the proportion of petrol vehicle drivers who pay fund the $17 billion fuel excise dwindles.
This masthead revealed earlier this month that Labor was considering winding back tax breaks on EV corporate lease deals, which cost the federal budget billions more than anticipated.
Albanese and Energy Minister Chris Bowen fronted a snap press conference on Friday in the Blue Room in Parliament House, usually reserved for major announcements, after weeks of scrutiny over the urgency of their response to the oil crisis.
“This war is real. This war is having an impact on Australians, like it’s having an impact right around the world,” Albanese said. “You can’t wish that away. What you can do is respond in an appropriate, orderly, adult way.”
The prime minister will lead a conversation on demand-side measures to conserve fuel at a meeting of the national cabinet on Monday. Premiers have been calling for a federal-led response, after Albanese last week said rationing policies were “not a question for me”.
“One of the lessons of the COVID pandemic is that we made a number of decisions as a nation that could have been made better if there was proper consideration,” Albanese said.
Coalition energy spokesman Dan Tehan said Albanese had been “dragged kicking and screaming” to address the crisis, as the average national price for regular unleaded reached a record high of $2.38 last week.
Albanese confirmed six tankers of jet fuel would arrive between now and April 8, and Labor was “working around the clock” to secure more, to be “over-prepared for what may come”.
Bowen said these moves meant “supply of petrol and diesel and oil will be the same, if not higher, than it normally would be”.
The government’s key aim to avert future shortages is to secure deals with oil-exporting Asian nations.
Asked about Australia using gas exports as leverage, Albanese said: “We expect reciprocation in our economic relations.”
Bowen said he had had many positive discussions with the Asian nations that supply most of Australia’s petrol and diesel, including Malaysia.
Malaysia announced overnight that Iran had allowed passage of its oil tankers through the blockade of the Strait of Hormuz, through which 20 per cent of the world’s fuel is exported.
Bowen said he was “very, very pleased” with his regular conversations with Malaysia.
“[The] Malaysian government has indicated to me they regard their role as a reliable supplier of liquid fuel to Australia extremely importantly, and that they see Australia as a key ally and friend,” he said.
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CLARIFICATION
An earlier version of this story said Prime Minister Anthony Albanese had rejected a cut to the fuel excise. It has since been updated to clarify that while he disagreed with Angus Taylor’s proposal and how to fund it, he did not reject a fuel excise cut altogether.
Paul Sakkal is Chief Political Correspondent. He previously covered Victorian politics and won a Walkley award and the 2025 Press Gallery Journalist of the Year. Contact him securely on Signal @paulsakkal.14.Connect via X or email.
Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.From our partners
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