Federal government considering ban on regular unleaded fuel

If you already thought petrol was too expensive, then things could be about to get a whole lot worse, with the government considering a plan to outlaw Australia's most popular petrol.

Regular unleaded - the cheapest available fuel at most service stations - is used by 80 per cent of motorists across Australia. Banning it would leave many motorists forced to use the premium pump, which is, on average, 10.7cents per litre more expensive, or use ethanol-blend fuel where available.

The target is the large amount of sulfur used in regular unleaded, with a government discussion paper arguing that banning that type of fuel would have positive health and environmental impacts, and would lift the overall quality of Australia's petrol, which is currently the lowest of all 35 OECD (Organisation for Economic Co-operation and Development) countries.

The discussion paper, lodged on Tuesday, explores several options for reducing the amount of sulfur used in our petrol, with Australia widely considered to be producing among the most sulfur-heavy fuel mixes in the world.

The average price difference between (ethanol blend) e10 and premium unleaded, for example, is 21 cents.

The options being discussed include removing regular unleaded from bowsers over the next two to five years, and reducing the amount of sulfur in ethanol-blend and premium unleaded petrol. Another option is to align with European Standards, reducing acceptable sulfur levels from 150 parts per million to 10 parts per million across all fuel types.

Any changes would impact Australia's four oil refineries, all of which would require a significant investment to align with any new standards.

But NRMA spokesman Peter Khoury warns making any changes without enforcing stricter regulations on petrol suppliers would expose Aussie motorists to price gouging at the petrol pump. 

"If you're going to remove regular unleaded and introduce a new type of fuel, the concern we have is the possible retail impact," he said. 

"The average price difference between (ethanol blend) e10 and premium unleaded, for example, is 21 cents, but the gap can be as high as 30 or 40 cents per litre in extreme cases. But the cost to produce premium unleaded is just a few extra cents per litre, so how do you explain that gap?

"There are no safeguards in place to protect people paying for fuel. If you take the regular unleaded choice away from them, that's going to further expose them to extra pain at the pump. 

"That's not to say we shouldn't be doing something about the quality of our fuel, but we need to have an honest conversation with the Australian people, and base our decisions on actual data."

Is a better environmental outcome worth the price of dearer fuel? Tell us what you think in the comments below.