Australian motorists could be paying $2 a litre for petrol in the coming weeks, following US military strikes on Iranian nuclear facilities that triggered a rise in oil prices. The international benchmark Brent crude briefly climbed above $US80 a barrel on Monday before easing to $US78.12, after tensions escalated further.
Analysts warn that higher fuel and energy costs would be another blow to households already struggling with the cost of living. The prospect of higher energy prices may also delay the next Reserve Bank of Australia rate cut to August instead of July, according to economists.
Oil has jumped more than 20% in June, or about $US14 a barrel, since Israel’s earlier strikes on Iran. The situation intensified after Iran’s parliament approved a measure to close the Strait of Hormuz, a critical waterway for about a fifth of the world’s oil supply. Two oil tankers reportedly performed abrupt U-turns near the strait after the US strikes.
CBA energy analyst Vivek Dhar estimated that oil at current levels of $US75 to $US80 a barrel would push pump prices to between $1.90 and $2 a litre, up from $1.75 last week. If oil reached $US100, unleaded fuel could cost up to $2.40 a litre. AMP chief economist Shane Oliver calculated that $US100 oil would translate to $2.13 a litre, raising the average household’s weekly petrol bill to a historic $74.55.
Oliver said higher fuel and energy costs could add 0.3 percentage points to headline inflation, potentially prompting the Reserve Bank to hold off on cutting rates at its next meeting in July. Jo Masters of Barrenjoey Capital Partners agreed that a spike to $US100 was plausible and would give the RBA reason to wait until August. International Monetary Fund managing director Kristalina Georgieva warned that turmoil in energy markets could hit global growth already under pressure from US tariffs. Market strategist Steve Miller expressed surprise at the calm reaction in financial markets, noting that Iranian retaliation could have severe economic consequences.
