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Chapter 1: What is the main topic discussed in this episode?
This is an ABC podcast. Welcome to Fuelcast. I'm Carrington Clarke. This is your source to stay on top of the numbers behind the ongoing energy crisis. It's Monday, April the 13th. From today, the ABC Business Daily team will have an additional explainer in the feed every Monday, Wednesday and Friday.
With the global energy crisis continuing, there's many questions about what's happening and what will happen next. Fuelcast is going to give you the latest three times a week alongside ABC Business Daily, which will be coming to you a little later today. Now let's run through the latest numbers. We are recording at around 10am in Sydney.
So the price of Brent crude has surged and is again above $102 a barrel. The national average price of unleaded is $2.21 per litre. and diesel is $3.22 per litre. Today, I'm joined by the incomparable Alan Kohler.
G'day, Carrington. Good to be here.
Alan, thanks for joining me. So Donald Trump has announced this US naval blockade of the Strait of Hormuz. This is in addition to the Iranian blockade of that same strait. Anthony Albanese is continuing his trips around Asia. He's now travelling to Malaysia and Brunei after his previous trip to Singapore to shore up Australia's supply of fuel. Alan, what's your quick reaction to this US blockade?
Well, so Donald Trump has decided to deal with the Iranian blockade by blockading the blockade.
A double blockade.
Yeah, we've got a double blockade. I mean, obviously what Iran's trying to do is charge ships to go through the Strait with a toll booth, and Trump doesn't want to accept that. So look, the last time the Strait of Hormuz was blockaded was 1951 by Britain, and that blockade lasted two years. And it was devastating for Iran and led to the collapse of the Iranian government in 1953.
Well, actually, it was a coup orchestrated by the CIA. Anyway, we're now in a situation where the world is seeing the potential for 20% of the world's oil supplies disappearing because of a blockade. And the other thing that kind of comes to mind about Trump's blockade is what are you going to do when a Chinese ship tries to go through?
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Chapter 2: What is the latest news on the US naval blockade of the Strait of Hormuz?
Part of it's already done. He's got more stops on the way. a type of petrol diplomacy in play here. What do you make of that? Is it going to be effective? And will it mean lower petrol prices for Australians?
Well, it's probably worth remembering that, you know, in the 70s, we used to make or used to produce most of our own oil from the Bass Strait off Gippsland. About 20 years ago, 20 to 25 years ago, the companies that look for this stuff decided to switch to gas.
So they stopped looking for oil and they started looking for gas because they thought that there were more customers for gas in particular in Japan and Korea. And they were right. I mean, they made tons of money from gas. The trouble is we've now got tons of gas but no oil. And... So what Albert is doing is he's trying to trade the gas for oil or to make sure we've got oil.
And also the other thing is that back then in the 70s and 80s, we had 10 refineries in Australia and now we've got two. one in Brisbane and one in Geelong. So we import basically 70% of our fuel, that is to say diesel, jet fuel and petrol, and those two refineries produce a bit of it, but they also have to import virtually all of them, 95% of the feedstock, the crude.
And they get it from everywhere. And it's interesting, Carrington, you talked about how the price of oil has gone up this morning, which it has by about between 8% and 10%. But those are the benchmarks, the West Texas intermediate price and the Brent price. And West Texas is US oil and Brent is North Sea oil. And those are the benchmarks we quote, and that's fair enough.
But that is not the price of physical oil that these refineries pay. For example... Last week the Geelong refinery bought a tanker load of oil from America, I think it was loaded in Florida or in the Gulf, and they paid $40 per barrel premium over West Texas.
And so the way that physical oil is priced is at a premium to these benchmarks, whatever the number might be, $20, $30, $40 a barrel premium.
And so when these refineries buy their oil, they're getting it from all over the place, from Malaysia and, you know, they're not getting it from the Middle East at the moment, and they get some of it from the North Sea, some from America and so on, and they're paying $30, $40 a barrel premium over these benchmarks that we quote. And that's why...
we find that the price of diesel, for example, has gone up much more than the price of oil that you hear about on the news.
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