Hard-pressed motorists have been warned not to expect relief at the bowser anytime soon as strong global oil demand, reduced supply and a weak exchange rate have combined to send pump prices surging.
Fuel prices have surged more than 13 cents a litre in Canberra in the past month, reaching well above $2 a litre for unleaded and spiking to more than $2.20 a litre for diesel, the Australian Institute of Petroleum says.
Nationally, the average price reached $2.03 a litre on Friday, a 15 cent increase in four weeks and well above the recent low of $1.73 per litre reached on July 9.
The jump in prices not only increases the weekly fuel bill but is expected to add to the expense of everyday goods including fruit and vegetables, dairy, bakery items and meat due to higher transport costs, exacerbating the nation's inflation problem.
IFM Investors chief economist Alex Joiner said there was no prospect of relief for drivers.
"The CPI [consumer price index] coming down is a good thing, but the prices of things that we use all the time are high and rising, like fuel," Mr Joiner said.
The economist said in addition to the cost of fuel, households faced "bill shock" from high electricity and gas charges and doing the weekly supermarket shop.
He warned this would further weaken household consumption by "taking away from spending on other things".
Global demand high
The Australian Competition and Consumer Commission said the price at the bowser was largely influenced by international crude oil prices and the Australia-United States exchange rate.
Global demand for oil is at record high levels, International Energy Agency figures show, driven by increased air travel in the northern summer, greater diesel-fuelled power generation and surging petrochemical production in China.
It reached 103 million barrels per day in June and the agency said it was likely to have been even higher last month.
At the same time, supplies have dropped. Saudi Arabia, one of the world's main suppliers, has sharply cut its production, reducing global supplies by 910,000 barrels per day to 100.9 million barrels per day, forcing countries to cut further into their fuel reserves.
The result, the IEA said, had been a surge in wholesale fuel prices.
"Deepening supply cuts have collided with improved macroeconomic sentiment and all-time high world oil demand," it said in its latest oil market report. "Refiners are struggling to keep up with demand growth. Tight gasoline and diesel markets have pushed margins to six-month highs."
As a result, the Tapis crude oil price - the most relevant wholesale price for the Australian market - has climbed in the past month, rising from little more than $US90 per barrel to reach above $US99 per barrel on Wednesday.
Weak dollar sharpens pain
The jump in global oil prices has been accentuated by the falling Australian dollar, which has made fuel sold in US dollars even more expensive.
After being worth more than 71 cents (US) in early February, the local currency has weakened, dropping to less than 64 cents (US) on Friday.
The decline reflects the relative strength of the US dollar, which has attracted investors because of the resilience of the American economy and the higher interest rates set by its central bank.
The US Federal Reserve currently has a target rate of 5.25 to 5.5 per cent, well above the Reserve Bank of Australia's 4.1 per cent.
Mr Joiner said the interest rate differential between the two central banks was unlikely to narrow any time soon, and could well get wider, potentially further weakening the Australian dollar.
"Most people have come to conclude that the RBA has paused for a sustained period while the Fed is still hawkish [on inflation]. For the Australian dollar to start to rally, the US Fed will need to become more dovish," Mr Joiner said, a development he thought was at least two months away.
Market Economics managing director Stephen Koukoulas agreed there was little prospect of the forces that had helped push fuel prices up will ease any time soon.
Mr Koukoulas said this would come at a cost to both households and the economy.
"Not only do [high fuel prices] feed into inflation, they are also a tax on growth," he said, warning they could drag gross domestic product lower.
Here come the EVs
But the economist said if high bowser prices continued, they could also speed the take-up of electric vehicles.
"The move to big four-wheel drives crowding around Kingston and Double Bay could slow with higher fuel prices," he said. "Price signals might accelerate the move to EVs."
But Mr Joiner was less sure. He said electric vehicles were still expensive, making it unlikely financial strapped households would make the switch in the short-term.
Those concerned about fuel prices were unlikely to switch to diesel, either.
Diesel prices jumped well above those for petrol following Russia's invasion of Ukraine early last year, and have remained elevated ever since, the consumer watchdog said.
In its most recent petrol monitoring report, the ACCC found "diesel prices continued to exceed petrol prices due to the higher international refined diesel prices since the Russian invasion of Ukraine", due to reduced Russian supplies and higher demand in the northern winter.