CANBERRA, AAP – Australia has some of the world’s lowest petrol and diesel taxes, potentially throttling federal efforts to provide cost of living relief.

Liberal premiers Dominic Perrottet, Steven Marshall and Peter Gutwein have asked for fuel excise cuts.

In New Zealand, petrol excise duty and road user charges have both been cut for three months, effective immediately, along with April 1 income increases for most households.

The Morrison government has said Australia’s state governments could cut vehicle registration fees.

Consumer watchdog chair Rod Sims says the world was already experiencing high crude oil prices, and the shocking events in Ukraine have forced prices even higher because Russia is a major supplier.

The Australian Competition and Consumer Commission’s latest price report found daily average retail petrol prices hit eight-year highs in the five largest cities in February.

Australia is one of the lowest-taxing countries for both petrol and diesel, keeping its prices among the lowest amongst developed economies, according to OECD data.

In the December 2021 quarter, that tax component made up of excise and GST was just more than a third (36 per cent) of the average retail price of petrol, the ACCC says.

Petrol prices have since surged past $2 a litre. Across the ditch, petrol has already broken $NZ3 ($A2.81) a litre.

NRMA spokesman Peter Khoury said on Tuesday fuel excise was meant to be collected from motorists and put back into the road network.

“It’s not meant to be a lever that you pull when prices go up,” he said.

For the Reserve Bank, the war in Ukraine and the associated increase in energy prices has created additional uncertainty about the inflation outlook.

“Members noted headline inflation would increase by more than underlying inflation in the near term because of the effect of global developments on petrol prices,” rate-setting meeting notes released on Tuesday said.

This could cloud decisions on interest rates, with financial markets pricing in an increase as early as June.

Oil shocks often give rise to calls for mandating the blending of domestically-produced ethanol with petrol.

The last time petrol prices were this high in Australia was in June 2008, when daily average prices hit 212.9 cents per litre in today’s dollars, ACCC data shows.

Katter Australia Party Leader and Queensland MP Robbie Katter says Australian-made ethanol is the “biggest tool” in competing with major oil companies.

A fuel mandate in Queensland already requires at least 4 per cent of all fuel sold in the state to be the cheaper E10 – a blend of 10 per cent by volume of ethanol.

Biodiesel, bioethanol, and biocrude can be used as alternatives to fossil-based fuels.

Some rural towns in the state’s north-west have seen diesel prices skyrocket to $2.19 per litre, he said.

The Howard-era Biofuels Taskforce found further subsidies for ethanol were not warranted as there were cheaper ways to reduce greenhouse gas emissions.

Current government efforts are focused on liquid hydrogen after a federal fuel security review in 2019 found the economy will be reliant on liquid fuel for decades, particularly diesel and jet fuel.

Demand for biofuels in Australia remains relatively low, although targets for increased ethanol use in Queensland and NSW have increased demand.

Ethanol is mostly made from wheat and sugarcane in Australia, and corn starch in the United States.

“You’re just realigning your food crops with your fuel,” Australia Institute energy expert Richard Merzian said.

“There’s a far more popular, commercially viable alternative right in front of us and that’s the electrification of transport, and making that fuel in our backyard.”