RBA expected to lift rates to 4.6% as fuel costs feed inflation
Diesel prices across Australia’s capital cities have risen nearly 40 cents a litre since the start of September, adding about $22 to the cost of filling a 55-litre tank. Canberra recorded the highest prices among the capital cities on Thursday, with diesel at 298.7 cents a litre and unleaded petrol at 250 cents a litre.
Fuel costs have risen to levels not seen since early April, adding to inflation risks and making another hike in interest rates all but certain, The Guardian reported. Australian diesel prices could push above $3 a litre if the Trump administration restricts US diesel exports amid floundering negotiations with Iran. Service stations have passed through sustained increases from international refineries, which have struggled to secure cheap crude as ongoing hostilities in the Middle East prevent supply from reaching global markets. The Brent crude benchmark has held above US$100 a barrel for most of the past two weeks, reaching its highest point since May.
Gulf diesel exports have fallen to about a quarter of prewar levels, with the conflict preventing transit through the Strait of Hormuz and the smaller Bab al-Mandab chokepoint. Ukrainian attacks have cut off Russian supply, further restricting global oil flow.
The Guardian reported the Trump administration is actively considering banning US diesel exports as a measure to suppress local service-station prices ahead of the November midterm elections. ANZ bank analysts said limits would be especially disruptive, noting the US has stepped up its global diesel supply since the war began and now exports more than 1.5 million barrels a day.
Australia almost entirely relies on overseas imports of diesel. Government data shows it brought in more than 18,400 million litres from January to July 2026. Just 510.9 million litres of that total came from the US, most of which arrived in April — underscoring how rarely Australian supply draws on American refiners.
Saul Kavonic, an analyst at MST Financial, told the ABC that Australia would have to ration diesel and face prices above $4 a litre within weeks of a US export ban. Dr Lurion De Mello, of Macquarie University’s Transforming Energy Markets Research Centre, said Australia’s supply remained healthy but a ban would lift prices as Europe, which depends on American diesel, began competing with Australia for shipments from South Korea and other Asian refiners.
“If you take any supplier out, globally, it puts pressure on prices to go up,” De Mello said.
De Mello projected Australian diesel prices could surpass $3.10 a litre but were unlikely to reach $3.50 as long as Asian refiners continued to access oil.
Australia’s diesel stockpiles have fallen to 31 days’ worth of supply, where they were in March, down from 39 days’ worth in July. Energy Minister Chris Bowen said government-backed fuel purchases had slowed as existing storage facilities were full.
The Albanese government temporarily lowered the fuel excise in March when diesel prices surpassed $3.10 a litre but has not announced a second excise cut. High fuel costs would threaten industries that rely heavily on imported diesel — including farming and mining — and push up prices in food, manufacturing and transport, The Guardian reported.
The Reserve Bank is expected to raise interest rates to 4.6% on Tuesday, a 14-year high, in part due to upward pressure from fuel costs.