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Chapter 1: What is the main topic discussed in this episode?
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Welcome to Fuelcast, I'm Carrington Clark and this is your source to stay on top of the numbers behind the ongoing global energy crisis. It's Monday, June the 15th. We are recording mid-morning amid a flurry of activity, but let's look at the latest figures. Since we last checked in, the price of Brent Crude has now plummeted. It's sitting below $84 a barrel.
The national average price of unleaded is sitting at $1.71 per litre, and the national average price of diesel has shot up to $2.32 per litre. Today I'm joined by Alan Kohler to dig into the major energy headlines. Good morning, Alan.
Chapter 2: What recent events have influenced oil prices?
Good morning, Carrington. All right, Alan. A lot has happened this morning. It does feel like it is momentous, although there's a lot of caveats that we have thought we were close before, although this does seem to have actually resulted in some sort of agreement. Is it a peace deal? Is it just a new ceasefire? Donald Trump says ships of the world start your engines.
This is kind of the first confirmation we had from his end of this deal being struck. He's also suggesting that the oil should start flowing. Now, we believe that the Strait of Hormuz will open up on Friday local time. Now, there are differences seemingly or contradictions between exactly how that will work.
Iran says that they will control the movement of ships along with Oman that sits on the other side of the Strait of Hormuz. So that would seem to be a worse situation for the flow of energy than what we had before the beginning of the war. But the increase, any increase in the movement of ships carrying energy would be a good thing, right, Alan? Of course, yeah, that's right.
But we haven't seen the deal yet so we don't know what it says and, you know, we don't know whether it's true that Iran will now still control the Strait of Hormuz with Oman. In fact, I think we can actually safely say that Iran does control the Strait of Hormuz now. And that's happened as a result of the American and Israel attack on Iran that happened on February the 28th.
So that has actually been, it seems to me, a permanent change to the world. Iran now has discovered that it actually can and does control the Strait of Hormuz. And they apparently have agreed to something or other. Donald Trump said, the deal with Islamic Republic of Iran is now complete, full stop. Congratulations to all.
So we don't know what it is. We don't know what it is. And part of the reason it seems that the opening up won't happen until Friday, Donald Trump says, is for purposes of mine removal. We believe that Iran has put mines in the Strait in order to
stop ships from passing through, although at different points during this conflict, Donald Trump said that there weren't that many mines or they weren't that big an issue. But the real problem here, isn't it, Alan, that if you're a shipping company and you're going to be the one to decide whether or not you're going to send your asset, your people through this Strait of Hormuz,
You'd want to be pretty certain that your ship is A, not going to run into a mine, and B, that we're not going to see a return of live fire through that strait. Do you think there is any chance that we're going to see a return to the normal flow of energy that we saw before this conflict began in any sort of reasonable time period?
I wouldn't expect so.
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Chapter 3: How is the ceasefire affecting shipping in the Strait of Hormuz?
I mean, there's also the question of insurance and what will the insurance companies charge now for insurance to go through it? Will it go back to where it was or will there still be a premium on insurance and how will the shipping companies react to that? I mean, and oil analysts basically almost unanimously say that the oil price will not fall back to where it was
pre-February 28th, and will take quite a long time to get back because of a risk premium in the market price. Inventory draws will still have happened, so the inventory needs to be rebuilt and there'll be a slower than expected recovery in energy flows. Yeah. So, look, you know, it's clearly going to be the case that we're not going to get back to $65 per barrel as it was on February the 27th.
let alone $55 a barrel where it was before the year began. So, look, you know, it'll take a while.
And also we have a major question over exactly how bad the damage is to energy infrastructure in the Gulf, both on the Iranian side. And, yes, Iran might have had sanctions on its oil, but it was a major supplier, for example, to China, and it was still...
selling into the global market, which meant that it was having impact on the price anyway, but also the damage to energy infrastructure through all its Gulf allies. Now, we know that there were multiple strikes, particularly early on in this conflict. I don't think we've ever had a full answer on exactly how destabilizing, debilitating those strikes were.
And it's going to be difficult for them to ramp up, isn't it?
Oh, very difficult. So this war has gone well, hasn't it?
Now, for us here in Australia, yes, the reduction in the price that we're seeing today in futures markets will flow through to lower prices, all other things being equal. But this does seem to make almost certain, doesn't it, that we will not see an extension of the fuel excise cut, which is due to lapse at the end of this month. So therefore, we are
going to see an increase in the price of the petrol pump for drivers come July 1st.
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