Australia’s fuel standards were tightened in 2024 to align with other industrialised nations, reducing sulphur levels in petrol to improve engine performance and air quality. However, a recent federal government decision to temporarily relax those rules has raised questions about what the shift could mean for motorists, fuel prices and the environment.
The move comes amid global oil market disruption linked to conflict in the Middle East, which has pushed crude prices higher and raised concerns about fuel supply and inflation. While the changes are expected to be short-term, they will allow petrol with higher sulphur levels to re-enter the Australian market.
Why the Government Has Relaxed Fuel Standards
The Albanese government has introduced several measures aimed at preventing a sharp spike in petrol prices across Australia.
These include releasing hundreds of millions of litres of fuel from the nation’s strategic reserves and working with the fuel industry to ease supply chain pressures.
One of the most debated measures is a temporary change to fuel quality standards announced by Energy Minister Chris Bowen. For 60 days from 12 March, petrol with higher sulphur content will be permitted for sale domestically.
The adjustment allows petrol produced at Ampol’s Lytton refinery in Brisbane to be sold within Australia instead of exported to overseas markets with less stringent fuel standards.
Australia currently has only two operating refineries. Alongside Lytton, Viva Energy’s refinery in Geelong supplies around 10 per cent of the petrol and diesel consumed nationally and continues to produce fuel meeting the stricter 10 parts per million (ppm) sulphur standard.
What Is ‘Dirty’ Fuel?
The term “dirty fuel” generally refers to fuel that contains higher levels of impurities.
In Australia, it is most commonly used to describe petrol with elevated sulphur levels.
Before December 2024, Australia’s petrol standards lagged behind many other developed economies. In markets such as the United States, the United Kingdom, the European Union, Japan and China, sulphur levels in petrol have long been limited to less than 10ppm.
Australia adopted the same 10ppm standard in 2024. Prior to that:
- Premium unleaded fuels (95 and 98) could contain up to 50ppm of sulphur
- Regular 91 unleaded could contain as much as 150ppm
The Lytton refinery currently produces petrol with sulphur levels of about 50ppm for export markets. To allow that fuel to be sold locally, the temporary standard will effectively revert to the pre-2024 level for premium unleaded petrol.
Sulphur occurs naturally in crude oil and must be removed during the refining process. Achieving the very low 10ppm level requires specialised equipment, with refinery upgrades costing hundreds of millions of dollars.
Will Higher Sulphur Damage My Car?
For most drivers, the temporary change is unlikely to cause noticeable problems.
The petrol being redirected to Australian service stations contains the same sulphur levels that were widely used domestically until 2024. In many cases it will also be blended with cleaner fuels, further reducing its impact.
Ampol has also committed to prioritising fuel supply to regions facing potential shortages, including rural and regional areas served by independent retailers.
For many motorists, particularly in major cities with diverse supply sources, the change may not affect them at all.
However, if higher sulphur levels were allowed to persist long term, there could be consequences for vehicle engines.
During combustion, sulphur forms sulphur oxides. When these combine with water vapour and condensation inside an engine, they can produce sulphuric acid, which may gradually corrode engine components.
Because the current policy is temporary, industry experts say the risk to vehicles over such a short period is minimal.
What About Air Quality?
While higher sulphur levels do not increase greenhouse gas emissions directly, they can worsen local air pollution.
Burning sulphur-rich petrol releases sulphur oxides into the atmosphere. These pollutants can contribute to smog formation and have known health impacts.
Energy market analyst Tristan Edis from Green Energy Markets says increased sulphur emissions can worsen respiratory and cardiovascular conditions.
Higher exposure, he says, is linked to asthma complications and an increased risk of heart disease and heart attacks.
Global Oil Disruption Behind the Decision
The government’s decision is largely tied to global oil supply uncertainty.
Conflict in the Middle East has disrupted shipping through the Strait of Hormuz, a crucial passageway for global oil trade. Roughly 20 per cent of the world’s oil supply normally passes through the narrow waterway.
As a result, crude oil prices have surged toward US$100 a barrel, with the potential to rise further.
Treasury modelling obtained by the ABC suggests sustained oil prices at that level for three months could push Australia’s headline inflation about 0.5 percentage points higher.
If crude averages US$120 a barrel for a prolonged period, inflation could increase by a full percentage point while shaving about 0.3 percentage points from Australia’s GDP.
Although global oil prices are outside Canberra’s direct control, boosting domestic supply can help limit price spikes at service stations and ease inflation pressures.
How Long Will the Change Last?
For now, the relaxed fuel standards are scheduled to remain in place for 60 days.
The government could extend the period if market conditions worsen, but current signals suggest the measure is intended as a short-term response.
Stricter fuel standards were a major policy milestone for the Albanese government, and Australia’s refining sector has already invested heavily in meeting them. Viva Energy’s Geelong refinery recently completed a $400 million upgrade to produce ultra-low sulphur fuel, supported in part by government funding.
Ampol’s Lytton refinery is undergoing a similar upgrade.
A Short-Term Fix in an Uncertain Market
For Australian motorists, the immediate impact of the temporary rule change is likely to be minimal. The move is designed primarily to stabilise fuel supply and prevent sharp price increases during a volatile period in global energy markets.
Whether the policy remains temporary will depend largely on developments overseas — particularly oil supply disruptions and global crude prices — in an economic environment where forecasting the future has become increasingly difficult.
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