Australian motorists may soon have to dig a little deeper to pay for fuel after global prices hit new seven-year highs amid growing concerns over a Russian invasion of Ukraine.
Oil prices rose more than 2% overnight, with benchmarks approaching the symbolic mark of US$100 a barrel. Brent, for example, rose 2.2% to reach $96.48 in transactions in the United States before falling slightly back to Asia on Tuesday.
Retail petrol prices in Australia are already at record highs, averaging 176.9 cents per liter in the week to February 13, according to Australian Petroleum Institute.
Peter Khoury, media officer at NRMA in New South Wales, expects average prices to reach 180 cents per liter or more in the coming days, noting that prices in Brisbane had already reached 192 cents for the unleaded.
“It’s not going to be pretty,” he said. “It’s going to keep going up.”
Regardless of any immediate supply disruption should Russia invade Ukraine, the likelihood of heavy sanctions being imposed on one of the world’s largest oil producers would likely drive up oil prices.
“There is real concern now that oil will break through $100 a barrel,” Khoury said. “We’re hoping the average in Australia won’t hit $2 a litre, but we’ll watch it.”
Robert Rennie, head of Westpac’s capital markets strategy group, said “the market is pretty much 100% dependent on Ukraine in the short term.”
“If we see further developments there, I can easily see US$120 for Brent,” he said.
Singapore, where most of Australia’s fuel imports come from, is a good indicator of what’s to come, as there’s usually a week’s lag between changes in that market and those in the ‘Australia.
The current diesel price in Singapore “tells you that you should expect to pay upwards of $1.70 on average next week or so on a wholesale basis” for fuel, Rennie said.
Rennie’s colleague, senior economist Justin Smirk, said if crude prices held at $120 a barrel, average pump prices in Australia could rise to $2.07 a litre.
If such levels lasted for a few weeks, “that would be significantly more inflationary than what we have now, indicating upside risks to our [first and second quarter] consumer price index forecast,” Smirk said.
However, any post-stress correction would likely be even larger “so there could be an even larger deflationary impulse in the second half of the year as gasoline prices come down from the highs,” he said. .
NRMA’s Khoury says drivers’ best chance of relief is to seek out the nearest relatively inexpensive gas station.
Governments also provide options, such as NSW Fuel Checkfor drivers looking for low cost fuel.
Prices for Brent and other oils were higher a decade ago, topping US$125 a barrel in March 2012. During those years, however, the Australian dollar was much closer to parity, if not higher , with the US dollar, shielding local motorists from some of the impact. .
The Australian dollar is currently trading just above 70 cents US, although market economists generally predict it will strengthen towards 80 cents US by the end of the year – provided it does not there is no major disruption to the global economy.
According to the latest energy audit published by the Australian National University.
“Bulk diesel is used in a wide variety of industries, including agriculture, mining, construction and public transport, all of which have been relatively unaffected, in terms of activity level, by the pandemic,” the audit said.
Frank Jotzo, director of the ANU’s Center for Climate and Energy Policy, said the threat of supply disruptions should give further impetus to efforts to decarbonise economies, as this would usually have the added benefit of reducing dependency. to imports.
“A zero-emission energy system means that a large part of global energy demand is met locally,” says Jotzo. “In particular, decarbonization means that oil for cars and trucks is replaced by electricity, and that most electricity is generated from local renewables rather than coal and gas which , in many countries, are imported. Similar changes will take place in the industry.
“This is particularly relevant for Europe which is a large net importer of all fossil fuels,” Jotzo said. “Well over half of the EU’s total energy is imported. All European countries except Norway are net importers of energy.
Northeast Asia is also highly dependent on energy imports, and although Australia is one of the world’s largest exporters of coal and gas, it also imports around 37% of the total energy used, Jotzo said.
“Australia’s current inland reserve of diesel and gasoline is relatively low and refining capacity is limited, so we are potentially vulnerable to disruptions in the shipment of fuels to Australia,” he said. “The more transport is electrified and therefore powered by local energy, the less risk it poses.”