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Victorian motorists face the threat of rising petrol prices as the widening conflict in Iran rattles global energy markets and ignites warnings that oil prices could blow past $US100 ($140) a barrel for the first time in years.
At bowsers in much of Melbourne, motorists faced paying more than $2.13 a litre for regular unleaded, with diesel and petrol prices widely tipped to rise further following the US and Israel’s attacks on Iran, which threaten to severely restrict global supplies of crude oil.
When markets opened on Monday, the cost of a barrel of oil climbed more than 10 per cent. It eased back to rises of about 5 per cent by the end of the day.
Contracts to buy and sell a barrel of Brent crude oil, the international benchmark, rose from $US72 to finish Monday at $US76.
As a rule of thumb, if prices continue rising, each $US10-a-barrel rise could add 10¢ a litre at the pump in Australia, economists say.
However, it could take up to a fortnight for the full effect to hit Victorian motorists. Any price swings for Australia’s regional oil benchmark, known as Tapis crude, take between a week to 10 days to flow through to prices at Australian petrol stations, said Peter Khoury, a spokesman for the National Roads and Motorists Association (NRMA).
Regular unleaded was currently trading at the top of the price cycles in Melbourne and Sydney, at $2.01 a litre and $1.98 respectively, he said.
While retailers would typically now begin discounting their fuel by a few cents each day to compete for customers, “it might be that we stay [at these peaks] for a bit longer”, Khoury said.
The size of the price increase so far was similar to previous market jolts sparked by geopolitical tensions last year and was not yet a cause for panic, he said.
What happens next will depend on a broad range of factors, including whether the conflict eases quickly or widens and affects the production or transport of energy commodities through the region.
Analysts said the main worry for energy markets was the Strait of Hormuz, the narrow shipping lane south of Iran, which is a major choke point for about one-fifth of the world’s oil and liquefied natural gas supplies. MST Financial analyst Saul Kavonic said shipments through the strait had just about halted.
“Tanker flow through Strait of Hormuz has dropped to a trickle,” he said.
Unless trade flows are re-established swiftly, some experts are tipping oil prices could rise beyond $U100 a barrel.
“The most recent comparison is during the early days of the Russia-Ukraine conflict, when the fear of loss of Russian supplies drove the oil price to over $US125 a barrel,” said Alan Gelder, the head of refining and oil markets at energy data firm Wood Mackenzie.
AMP chief economist Shane Oliver said there was a 60 per cent chance that the war would ease within a week or two and the impact on energy markets would be limited.
However, a longer conflict would have severe global economic impacts, he said.
“This could mean a bigger and much longer disruption to oil supplies, conceivably resulting in a doubling in oil prices to around $US150/barrel, which could drive a sharp fall in shares.”
The conflict in Iran could also affect household energy bills in Australia by driving up the cost of natural gas, which is used for household cooking, heating and hot water, and in the gas-fired power stations that supply the electricity grid.
Australia’s gas prices have been linked to international markets since 2015, when the nation began exporting liquified natural gas from Queensland, meaning any swings on global markets affect local consumers.
Energy Minister Chris Bowen said on Sunday that the disruption to global markets highlighted the case for boosting Australia’s energy sovereignty by producing more of its own supply with renewables.
“It’s a reminder that the most reliable form of energy is energy here in Australia, our sun and our wind, stored in a properly managed grid, electric vehicles, which don’t require petrol,” Bowen said.
“That’s how you build energy security so that you’re not subject to these geopolitical changes.”
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