Chapter 1: What is the current state of the fuel excise in Australia?
Music and more. 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 Monday, May the 11th. We're recording mid-morning. Let's have a look at the figures. The price of Brent crude is still elevated and has increased to $104 a barrel since we last checked in.
The national average price of unleaded has dropped slightly to $1.84 per litre. And the national average price of diesel has dropped as well, coming in at $2.47 per litre. Today, I'm joined by Ian Verinder to dig into the major energy headlines.
Chapter 2: How are US-Iran negotiations affecting global oil supply?
Good morning, Ian.
G'day, Carrington. How are you going?
I'm going well, thank you. I was watching carefully this morning on Radio National Breakfast as we saw kind of this back and forth once again between the US and Iran about the next step in peace negotiations. In some ways, all the steps don't matter because... Where have we ended up? Both sides knocking back the proposal from the other as not being up to standard.
So we have effectively a stalemate in the Gulf, which means we still have this supply shock in place. And we did see once Brent crude started trading again, a considerable increase in the price. Now, this kind of comes ahead of a big decision that the government is going to need to make.
which is about whether or not to extend the fuel excise cut that they put in place earlier on in this conflict. Ian, take us through the question facing the government about whether or not they should let it lapse or extend the period, given what we're seeing in global markets.
Yeah, look, it's a really difficult one and it's going to be key to the budget. I mean, clearly, you know, Australians are facing another cost of living crisis Well, is it a crisis? I mean, there's a lot of crises these days, aren't there? Clearly, Australians are going to be facing a really tough time ahead when it comes to the cost of living. We've had three interest rate hikes.
We've got an inflation level that is rising and could exceed even the levels we've just seen at 4.6%. So does the government extend that discount or into the future or does it take it off? Now, as we saw the last time we had an inflation breakout and we saw the federal government deliver power price rebates, the problem with them, it does provide some relief to people during that period.
But the problem is that it extends the inflation numbers through to long after those rebates have come off. And so it makes it look as though the inflation problem is much more difficult and it keeps pressure on on the Reserve Bank to keep interest rates elevated. And so that is the ongoing question that the government is going to have to answer.
Now, bear in mind as well that the IMF came out just recently and specifically warned the Australian government in the budget to not give cost of living measures, relief measures to ordinary Australians because it does have that inflationary impact. The other issue, I guess, of course, is Well, where does the government go?
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Chapter 3: What impact does the fuel excise cut have on Australian consumers?
Does it try to differentiate a little bit between ordinary Australians and business interests? So do we give relief to farmers and to transport companies to try and ensure that the cost of living is not elevated? So maybe the discounts... are extended at that level and not at a household level.
Yeah, I mean, this is going to be very tricky for the Reserve Bank when it was updating. One of the difficulties for the Reserve Bank, as you said, has been recently, it's been trying to deal with those rebates and electricity rebates coming off. It's already going to be messy for them trying to assess the inflationary data because of this excise cut and what it's meant to
to the current headline figure. But yes, if you kick that problem down the road, it makes it even messier for a longer period. And yes, maybe a simpler answer will be to look at the relief for diesel and for heavy users, because that will mean that there's less of an impact on some of those second wave, third wave price increases for things like groceries.
and allow the petrol excise cut to lapse. But I think the government would be hoping that when that happens on 1st of July, that the price of petrol that people are actually paying at the bowser is lower than the rate it was before these initial Israeli-US strikes on Iran. At the moment, it's just above with that discount what it was before the start of this conflict.
Maybe it will trend down, but given what we've seen happening overnight yet again, There is no end in sight to this conflict, and it may well be that the oil price stays elevated for longer.
One of the other interesting things to come out was this update from Saudi Arabia's massive oil company, and it's actually seeing increased profits during this conflict, despite the fact that it's been cut off from a traditional way for it to supply the world.
Yeah, it's quite amazing, really. So the March quarter earnings for Saudi Aramco, which is the world's biggest oil oil company, $33.6 billion in the March quarter, and that's up 26%. So this is during, you know, this is after the crisis had begun and the attacks had begun.
What they've done is that they've shipped a huge amount of oil the other way, through to the Red Sea via a 1,200 kilometre pipeline. So they're now putting 7 million barrels a day through that pipeline and and shipping out through the port of Yandu in the Red Sea. Now, normally they would be shipping about 10 barrels a day, so it is substantially lower than it would have been.
But this is a pipeline that was built, I think, in 2018 or at least upgraded in 2018. But they've since upgraded it again to ensure that they can get as much oil out as possible. So that's a factor that is limiting the damage rate. to this conflict. So we are seeing quite a bit of oil flowing through there. And look, we've just been talking about domestic petrol prices as well.
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