Treasurer Rejects Fuel Excise Cuts as Middle East Conflict Threatens Petrol Price Surge
Treasurer Jim Chalmers has firmly ruled out any reductions to the fuel excise, despite growing concerns that petrol prices are poised to skyrocket due to escalating tensions in the Middle East. This decision comes as Shadow Treasurer Tim Wilson accuses the government of profiting from higher fuel costs, with Westpac modelling indicating Australians could soon face prices as high as $3 per litre at the pump.
Political Clash Over Fuel Tax Implications
In a heated exchange, Tim Wilson argued that tax is a major component of petrol costs, stating on Sky News that when prices rise, the government collects more revenue through excise. He challenged Chalmers to address what he called a 'tax addiction.' However, Chalmers vehemently denied these claims, accusing Wilson of 'intentionally lying' and emphasising that excise revenue does not increase with petrol price hikes. Chalmers dismissed Wilson's assertions, questioning his credibility on economic matters.
Geopolitical Tensions Driving Oil Market Volatility
The warning of soaring petrol prices follows recent military actions, including US and Israeli strikes in Iran that resulted in the death of Supreme Leader Ayatollah Ali Khamenei, prompting retaliatory measures from Tehran against US assets and regional infrastructure. Westpac analysis suggests that if disruptions are confined to Iranian production—accounting for about 4% of global supply—oil prices could rise by an additional US$25 per barrel, reaching approximately US$100.
Critical Risk: Strait of Hormuz Closure
The most significant threat stems from the ongoing closure of the Strait of Hormuz, a narrow shipping corridor responsible for transporting around 20% of global oil trade. Iran has effectively halted commercial traffic through the strait for four consecutive days, employing drone strikes and military threats to deter vessels, despite sustained US counterstrikes. Reports indicate at least four oil tankers have been hit, and maritime data shows an 80% plunge in seaborne traffic through this chokepoint. Additionally, major maritime insurers have withdrawn coverage for ships in the area, further discouraging passage.
Escalating Threats and Economic Impact
Brig Gen Ebrahim Jabbari, a senior adviser to Iran's revolution guards commander-in-chief, issued a stark warning: 'We will attack and set ablaze any ship attempting to cross.' This threat has led at least 150 tankers to anchor as shipping companies avoid the 160km passage, which is only 24 miles wide. Westpac warns that if shipping through the Strait of Hormuz is disrupted for up to a month, Brent crude oil prices could spike to US$113 per barrel. In a severe scenario with disruptions lasting three months or more, prices could surge to US$185 per barrel.
Projected Impact on Australian Petrol Prices
Westpac highlights that prolonged and intense disruptions would incur substantial real economy costs and damage market sentiment. This could translate to petrol price increases in Australia ranging from 25 cents to $1 per litre, depending on fluctuations in the Australian dollar and refinery margins. At the upper end of this range, fuel prices in many Australian cities could approach or even exceed $3 per litre, placing additional financial strain on consumers.
