Chapter 1: What is the main topic discussed in this episode?
This is an ABC podcast. Welcome to Fuelcast. I'm Carrington Clark, and this is your source to stay on top of the numbers behind the ongoing energy crisis. It's Wednesday, April the 22nd. We're recording mid-morning. Let's dig in. The price of Brent crude has risen to US$99 a barrel. And since we last checked in, the national average price of unleaded has dropped to US$1.98 per litre.
And the national average price of diesel has dropped to $2.88 per litre. Today, I'm joined by Ian Verinder to dig into today's major energy headlines. Good morning, Ian. Good morning, Carrington. Ian, we've just been watching the Prime Minister Anthony Albanese and Energy Minister Chris Bowen tell us about these four additional cargos of diesel being secured for Australia today.
through BP, Viva Energy and Export Finance Australia. They say it's an additional 200 million litres of diesel and the cargos have come from South Korea, Brunei and Malaysia. Ian, does this fill you with any optimism?
Well, it's better than not having it, let's face it. And, you know, we as a nation have the highest consumption of diesel per person than any other country on the planet. And the reason for that is we're, you know, a massive mining country and a huge agricultural country as well. So we require vast amounts of diesel to keep our industry going. And it's a big continent.
with a relatively small population, which requires a lot of transport, intercity transport, all run by diesel. There's a percentage of cars, around about, I think, 10% of passenger vehicles run on diesel as well. And those vehicles, they're subject to what's known as what economists call elasticity of demand. If the price gets too high, you don't drive your car.
You catch the train, you walk, you ride a pushbike. Yeah. But when you're driving a Mack truck from one city to another, or you're running BHP's iron ore division up in the Pilbara, you have no option but to keep using the same amount of fuel regardless of the price. And so we need supply. And that's what we're concentrating on at the moment. Supply, not so much price.
Yeah, that's right. So it's good to not be obviously caught short. The worst nightmare would be for the Bowsers to run dry or there not be enough supply of diesel, as you say, to fuel our mining industry or our agricultural industry. But we don't actually know how much is being paid for this diesel. And so we don't really know what that means for the price of diesel here at home, do we?
Well, we don't know anything, really. It's totally opaque. And look, at the moment, and quite rightly, the government is focused on supply, just making sure we've got enough fuel to keep the country running. And the price factor, well, that's being pushed into the background.
But there's broader implications than simply how much it's going to cost to fill up the truck or fill up the tractor or whatever it is. I mean, this is going to have a really large effect on the Australian economy down the track because it is going to really feed into the inflationary forces that will probably push the Reserve Bank into raising interest rates and really detract from our growth.
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Chapter 2: What recent diesel supply updates were announced for Australia?
You know, everybody keeps talking about, oh, the price of Brent is now, what is it today?
About $100 a barrel.
But if you wanted to buy a barrel of oil on the spot market, like you wanted it right now, you'd probably be paying $140 to $145 because that contract that we keep talking about is for delivery down the track in a couple of months' time. And most markets are pricing in a resolution to the conflict at that stage.
But the price of oil right now is actually much, much higher than the price we're quoting. And now on top of this...
So Citi did some analysis of this, which was quite fascinating, suggesting that Australia is paying, they think, between $15 and $25 a barrel above that Brent crude price, which is a much bigger price premium than we would usually be paying.
Oh, absolutely. And as we're saying, this is all about securing supply and forget the price. And the reason why we can secure the supply is because we can afford to. Firstly, we've got that leverage in terms of gas. We can say to these countries that with liquid fuels, that are producing liquid fuels, you want our gas, we want your liquid fuels, you better reciprocate.
But the other factor, of course, is that we're a rich nation and we can afford to do this. If you're not a rich nation and you can't afford to do this, this is going to lead to enormous economic problems for, you know, particularly through Southeast Asia.
Yeah, because unfortunately it is a bit of a zero-sum game at the moment. If Australia is getting this diesel, it means someone else can't get the diesel. Yeah. And if those other places, for example, Southeast Asia or South Asia are which seem to be experiencing this very acutely already real shortages when it comes to refined fuels.
That means they're not going to be able to produce the things that they would otherwise produce. That might be agriculture, it might be manufactured goods. And those things are going to flow through to the broader economy, aren't they? And that's going to force up inflation elsewhere. Australia is part of the global economy. That's also going to have repercussions here.
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Chapter 3: How does Australia's diesel consumption compare globally?
And look, we are in the fortunate position that we can afford to do this. But what do you do? I mean, if you're the prime minister of Australia and you've got the opportunity to try and save your constituency, well, that's what you're going to do. And it's, you know, really, you know, forget about everybody else. It's kind of every man for himself at the moment.
How does this fit the messaging? On one hand, the government has been at pains to say Australia doesn't have a shortage of fuel. We still have as much fuel in the country as we had before this situation unfolded. But now that they are going out and doing live press conferences about the arrival of ships with extra supply...
Does that create a bit of confusion in the eyes of people about exactly how big a crisis is this?
I think what they're trying to do is to avoid what we saw in the early part of this conflict, where people were panic buying. This is all about, you know, calming down the community. Don't go out there and buy more than you need. There's plenty coming in here. Look at these ships that are about to arrive. And we've seen that at prices at the Bowser as well.
You know, the less demand that we've got, and there's numbers that were released last week essentially showing that Australians are now buying fuel less often. So I think what was happening was people would fill up their tank, drive for 10 minutes down the roads. If they saw another petrol station, put more in. So there's less transactions going on.
So I think people are starting to feel a little more comfortable that there is enough to get by, that we're not going to run out. But, you know, at what price?
Ian, thank you so much for joining us on Fuelcast.
Pleasure.
And we'll have another episode of ABC Business Daily for you later today. Make sure you're following the ABC Business Daily feed on ABC Listen or wherever you get your podcasts so you never miss an episode. And we'll be back in your feeds with all things Fuel on Friday. Bye, Ian. Thanks, Kirsten.
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