The government has sought to reassure motorists that there are sufficient petrol supplies amid reports of panic buying and regional service stations running dry, after yet another surge in global oil prices left Australians bracing for a spike of almost 30¢ a litre at the bowser.
On Monday, as the conflict in the Middle East raged on and the Strait of Hormuz off Iran’s coast remained effectively shut to the one-fifth of the world’s oil that normally passes through it, crude oil prices blew past $US100 a barrel. The price of Brent Crude reached $US107, up from near $US70 last week.
It came as some regional petrol stations in NSW and Queensland said they were running dry following an unprecedented collapse in supply availability, as the panic around fuel prices appeared to escalate beyond the widespread queues seen last week in the days after the war broke out.
Energy and Climate Change Minister Chris Bowen said the shortages were a result of surging demand, particularly for diesel, and that Australia had good stock levels of petrol, jet fuel and shortages to ride out the crisis.
“Every contract for demand that has previously been ordered, for diesel, petrol or anything else is being honoured,” Bowen said before delivering a keynote address at Climate Action Week Sydney. “Inevitably, when you’re seeing a huge increase in demand, they’re having trouble keeping up with that. This is not a supply problem, but we’re seeing a huge spike in demand.”
In 2023, the Australian government applied a minimum stock obligation that requires fuel importers and refiners to hold baseline levels of petrol, kerosene and diesel. Bowen said he would call on that if necessary, but it was an additional supply if the international situation worsened rather than necessary right now.
Bowen said Australia held good stock levels of petrol, jet fuel and diesel – 3 billion litres of diesel and 1.5 billion litres of petrol.
“There is absolutely no reason for panic – panicking full stop, panic buying, panic anything,” Bowen.
“Because, unlike previously, when our petrol and diesel reserves were held under Angus Taylor in Texas, they’re held now in Geelong and Brisbane for easy access.
“We enter this international crisis better prepared than we have entered similar crises, certainly [compared with] the lead-up to the 2022 energy crisis caused by the invasion of Ukraine, we are much better prepared now than we were as a country.”
AMP chief economist Shane Oliver said that for each $US1 rise in the price of crude oil, Australian motorists could expect to see about a one cent rise at the bowser. Oliver pointed to the movement of the West Texas spot price, from $US67 the day before the war broke out, to $US80 on Friday morning, to $US91 by Friday evening. By Monday morning, it had reached $US108.
“That’s a humungous rise. That should see a 28¢-a-litre rise since Thursday. Some of that is already factored into (bowser prices), but there’s still quite a lot to flow through. You could still see quite a sharp rise from here,” Oliver said, noting that the cyclical nature of petrol prices in cities such as Sydney and Melbourne made it difficult to measure exact movements day by day.
Oliver said that as the spectre of a drawn-out conflict emerged, costs linked to the higher price of oil could ripple through the economy. He said the rise observed so far in oil costs would add about 0.8 per cent to inflation, and other factors such as the higher cost of transporting goods around the country, higher airfares and other increased costs could all weigh on the Reserve Bank’s thinking as it examines interest rates.
“Households with a 40 cent rise per litre in petrol, they’ll be quite a bit worse off, that’s about $14 a week to the petrol bill, or $730 a year, it’s quite an impost, equivalent to a pre-tax wage rise of about $1000,” Oliver said.
The NRMA’s Peter Khoury said that $US100 a barrel was “a number no one wanted to see but I think it was inevitable”.
Khoury said that while the current price was still some way off the $US133 per barrel high seen as a result of Russia’s invasion of Ukraine in 2022, “the trends coming out of the Middle East aren’t great”.
He reiterated a message driven by politicians and the consumer watchdog over the past week, about the retail price service stations are charging at the bowser that are significantly higher than the wholesale prices it costs them. He said there was a gap of about 40 cents per litre based on averages in Sydney and Melbourne.
Despite this, Khoury said prices could still rise as a result of crude’s latest upward surge.
“Please, stop panic buying fuel. This is not Covid and we’re not selling toilet paper,” Khoury said at a press conference on Monday.
“What we are now seeing is some service stations running low on supply and that is because Australians are buying fuel at a far greater rate than they normally would,” Khoury said. “We are also hearing troubling reports of people trying to stockpile the fuel at home, which, apart from not making any economic sense, is also extremely dangerous. Please, do not fill jerry cans and put them in your garage because that is unsafe.”
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Elias Visontay is a National Consumer Affairs Reporter at The Sydney Morning Herald and The Age.Connect via email.
Caitlin Fitzsimmons is the environment and climate reporter for The Sydney Morning Herald. She was previously the social affairs reporter and the Money editor.Connect via email.
