Aussie household budgets 'under strain' as petrol prices threaten to top $2.20

A majority of Australian households say soaring petrol prices are putting immense strain on budgets as analysts predict a worst-case scenario of $2.20 a litre.

A survey of hundreds of Nine.com.au readers found 64 per cent of households are feeling under strain with current prices, with the rest coping or not owning a car at all.

Almost a third of readers (29 per cent) said the soaring cost of petrol is so high it is directly forcing them to choose other modes of transport such as walking or even selling their current vehicle to purchase one that is more fuel efficient.

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Currently the average price per litre of unleaded 91 fuel is hovering between $1.80 and $1.90, with analysts tipping that the skyrocketing cost of oil and the Russian war in Ukraine will see prices soar.

Chief Economist at CommSec Craig James said petrol prices are "on course" to hit as high as $2.20 over the next few weeks.

"The Australian terminal gate or wholesale price is around $1.78 a litre. Add a gross retail margin of 12-13 cents a litre and the national average price is likely to lift to $1.90 a litre," Mr James writes.

"And based on the US$20 lift in Brent crude last week, average Aussie petrol prices will soon be $2.10 a litre."

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Mr James said the flow-on effect of households stretching their budget to cover their fuel bill will be a reduction in non-essential spending, ultimately hurting the economy.

"The average Australian family is spending a record $257.46 a month on petrol, up $35 from the beginning of 2022," Mr James said.

"That is effectively 'dead' money or a tax on consumption, meaning that consumers have to either cut back on nonessential spending or dip into savings."

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A rise in the cost of groceries could be compounding the stress on family budgets as supermarkets bear fuel costs for a truck-driven national supply chain.

"Goods with a high transport component such as fresh food also are likely to become more expensive, boosting the rate of inflation," Mr James predicts.

"And taxis, ride-sharing services and airfares could also become more expensive if the price of crude oil remains elevated."