Aussie drivers could be hit with oil price surge if Iran war heats up again
Australian motorists could be heading for a double whammy at the bowser with the government’s fuel excise discount set to expire just as international experts warn that a fracturing Middle East ceasefire could push global oil prices to $US150 ($225) a barrel.
The grim forecast comes from energy analytics firm Rystad Energy, following the latest escalation of tensions between the United States and Iran.
Aussie motorists could soon be in for more pain at the bowser. Wayne Taylor
The recent friction has pushed the ceasefire struck in April to its breaking point, sending tremors through global financial markets.
According to Claudio Galimberti, chief economist at Rystad Energy, global crude inventories have plummeted to exceptionally low levels after slightly more than 100 days of conflict in the Middle East.
Galimberti warned that if fighting continued without a diplomatic resolution to restore the flow of oil, crude stockpiles would dwindle further, triggering an aggressive upward spiral in prices over the next couple of months.
On Tuesday, international benchmark Brent Crude was trading at roughly $US94 ($141).
However, Rystad Energy estimates that a total collapse of the ceasefire and a full resumption of hostilities could swiftly drive prices towards $US150.
For Australian drivers already struggling with the cost of living, the global market turbulence could not come at a worse time.
The federal government’s temporary halving of the fuel excise – which slashed 26 cents per litre off the cost of petrol and diesel in response to the outbreak of the war – is scheduled to finish up at the end of June.
Australia’s peak motoring body, the NRMA, has predicted the average price for unleaded petrol in Sydney will hit $1.99 a litre in July.
This would be a 40-cent increase compared to prices recorded before the US and Israel entered the war with Iran.
Diesel drivers will face an even harsher penalty at the pump. The NRMA expects diesel prices to sit around $2.37 a litre in July, climbing 65 cents higher than pre-war baselines.
The severity of the current situation has historically been viewed as a worst-case scenario by market insiders.
Speaking to the Dow Jones Newswire, Antoine Halff, a fellow at Columbia University’s Centre on Global Energy Policy and a former chief oil analyst at the International Energy Agency, said emergency planners used to view the effective closure of the Strait of Hormuz - the vital maritime transit route for a fifth of the world’s petroleum - as an unthinkable catastrophe.
Analysts previously assumed the strait was simply “too big to fail,” yet that very nightmare scenario has been unravelling for over three months, Halff said.
Halff cautioned that while a variety of temporary workarounds have kept crude futures from surging past the $US100 mark for most of the conflict, these shock absorbers could last forever because the full impact of the crisis was yet to be felt.
Jorge Leon, Rystad Energy’s senior vice president and head of geopolitical analysis, said that the probability of a near-term diplomatic breakthrough had narrowed significantly from the 40 per cent chance estimated just weeks ago.
Leon warned that oil price volatility would remain severely elevated as financial markets looked for signs of whether diplomacy could reassert itself or if the sector was locked into a sustained escalation cycle.
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