Govt considers cutting high-speed diesel refining margin cap to $30 per barrel

According to The News, the federal government is weighing a reduction of the high-speed diesel (HSD) refining margin cap to $30 per barrel, down from $41.89. The step is intended to reduce the burden that elevated overseas refining margins place on domestic buyers. The proposal follows a steep rise in diesel crack spreads that occurred amid geopolitical tensions and supply disruptions.

The average gross refining margin was $28.8 per barrel in August 2026, versus $36.7 in July and $5.4 in August 2025. Part of the month-on-month fall has been put down to the HSD crack cap, which came into force on August 20. The current $41.89 ceiling on HSD crack spreads was set last month under a new pricing framework and continues to apply.

Refinery companies have warned that a smaller margin would hurt earnings just as the industry must raise equity for large upgrades. Under the Brownfield Refining Policy, the five existing refineries plan deep conversion, cleaner fuel output and added capacity, a programme the sector expects to cost $5 billion to $6 billion. Industry representatives contend that high spreads could allow refiners to bolster their finances during volatile periods, while the government seeks to balance refinery profitability against consumer protection.