The Coalition plans to halve the fuel excise when global prices spike. How will Australians respond?

Tang Ming Tung/Getty Few prices are as visible as fuel.

Every day, we drive past figures advertised on signs outside fuel stations, and watch the dollars climb in real time as we fill the tank.

The federal Coalition’s new policy, called the Fuel Price Shield , would automatically halve the fuel excise – the tax levied by government on petrol and diesel – when the price of Brent crude averages more than US$100 ($A140) a barrel over a two-week period.

The Coalition says it will fund this measure through $8 billion generated from its planned cuts to the tobacco excise.

The Liberal and Nationals estimate this would cut around 27 cents a litre from fuel prices, or about $15 from a typical tank.

The heavy vehicle road user charge, a fee paid by the operators of trucks and buses, would also temporarily fall to zero.

For households already under cost-of-living pressure, that would be a saving.

But tax changes do more than adjust what we pay.

Research shows they also change public expectations and behaviour.

Whether this policy works as intended depends on how Australians respond to cheaper fuel and cheaper tobacco.

Hip-pocket relief, but not for everyone There is good evidence to show most of the fuel tax cut would reach motorists.

When Australia temporarily halved the fuel excise in 2022 in response to surging oil prices driven by Russia’s invasion of Ukraine, the reduction was passed through to motorists in most locations.

But who benefits the most is a different question.

Germany, France and Italy all temporarily reduced fuel taxes or provided fuel-price discounts during the 2022 energy shock .