Alan Kohler on the odds of a recession
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Why are rising oil prices in the Persian Gulf and Red Sea sparking inflation concerns?
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Oil prices are rising again, thanks to the conflict in the Persian Gulf spreading to the Red Sea. It's fueling inflation around the world, including in Australia, where it has been stubbornly high. It means an interest rate rise is all but certain when the Reserve Bank meets next week. Today, ABC finance expert Alan Coller on the squeeze on household budgets and the prospect of a recession. I'm Melissa Clark, filling in for Sam Hawley on Gadigoland in Sydney. This is ABC News Daily.
Alan, over the last week, oil prices have really surged. They've been the highest they've been for months. You know, they reached a hundred and ten US dollars a barrel. They're staying over that hundred dollar benchmark for most of the month. Clearly, the disruptions that we've seen to trading routes in the Middle East, both the Strait of Hormuz and the Red Sea. are taking their toll on global oil supplies.
Well that's definitely true. You know, the whole thing is ramped up again. in the Middle East and in the Strait of Hormuz and it's also I think part of the reason the oil price is going up so much. Is because it's sort of spread to the Red Sea now.
Houthi rebels have captured more key islands in the Southern Red Sea, tightening their grip on the Bab el-Mandab Strait, one of the world's key shipping routes.
The Strait, the Red Sea, and inland Saudi Arabia are now active war zones. Some analysts now have warned the price of oil could reach a record 150 US dollars a barrel, perhaps by the end
of the year. It's got Yemen on one side and Africa on the other and the Houthi rebels in Yemen. seem to have got control of part of the coast and an island in that strait, and there also over the weekend they've started attacking Saudi Arabia.
How are higher oil and diesel prices affecting Australian household budgets and grocery costs?
So So that whole problem in the Persian Gulf has now spread to the Red Sea and that's what's kind of spooked. The oil markets sending the price up. And separately. They seem to be knocking out some refineries. And that is putting up the refinery margins, not just of our refineries, but all refineries around the world. So you're getting a double whammy effect really. One is the oil price goes up and then on top of that the margins that refineries charge. for turning that oil into petrol and diesel. are also going up.
Mm. And that has a flow on effect through to Australia pretty quickly. Uh we're already seeing prices at the Bowser jump, even though it can take a while for some of these impacts to flow through to end users, but When it comes to both petrol and particularly diesel, they both play a big role in the economy, don't they?
Well, yeah, obviously a lot of cars use diesel as well as petrol, so that has an immediate impact on prices. for consumers, but the thing about diesel is that it's also used for transporting basically everything around the country. the increase in the diesel price goes on to the prices of f all goods Yeah, supermarkets, everything. So that's kind of further increasing prices. in general and we we just don't know where that's going to end.
There's certainly a huge amount of pressure on supply. And we know, particularly given as you were just talking about, the use of petrol and diesel in the supply chain in Australia is significant. And that adds to inflation. We've seen the Reserve Bank Chair Michelle Bullock address a parliamentary committee at the end of last week and She made it clear that her concerns about the current circumstances are significant. Some of these upside risks to inflation appear to be materializing.
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Chapters
7 chapters
1
Why are rising oil prices in the Persian Gulf and Red Sea sparking inflation concerns?
0:00–2:45
2
How are higher oil and diesel prices affecting Australian household budgets and grocery costs?
2:45–4:54
3
What is the Reserve Bank of Australia’s rationale for an imminent interest‑rate rise?
4:54–7:06
4
Why does the RBA focus on core inflation rather than headline fuel price spikes?
7:06–9:34
5
How do global rate‑hike trends (US, Japan, Europe) influence Australia’s monetary policy?
9:34–11:12
6
What role does weak productivity play in the decision to tighten monetary policy?
11:12–13:05
7
How likely is a recession in Australia given higher rates, lower migration and oil shocks?
13:05–14:23