Are we on the road to $2.50 petrol?
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What is the main topic discussed in this episode?
ABC Listen. Podcasts, radio, news, music and more. Hi, I'm Patricia Carvellis, the host of Politics Now. And sometimes it can be hard to cut through all the noise from the Canberra bubble. But on the Politics Now podcast, bursting it wide open is our core business. I'm joined by the brightest minds at the ABC to break down the polyspeak and have a chat about what's actually going on behind the scenes. It's called Politics Now and you can find it on ABC Listener.
The cut to the fuel excise has ended, but the Iran war hasn't. So what does that mean for how much we'll be paying at the fuel pump in the months ahead? Today, Sol Kavanagh, energy expert at MST Financial, on the world's diminishing fuel supply and whether we're all out of fix-its. I'm Sam Hawley on Gadigal land in Sydney. This is ABC News Daily.
We would have to, you know, like think about other options, maybe carpooling, maybe depend more on the public transportation. It's a little bit disappointing. It would have been nice if they had have extended it for a little while longer. It is a bit of a hit to the bank account as well as the car. Nothing you can do about it, can you? Until they get their act together and Trump gets a deal. What do you do?
So the cut to the fuel excise is gone and motorists have really been noticing the difference immediately. So what should we expect in the weeks ahead as we fill up? How much more do you think we'll be paying? How high could it go?
So with the final unwind of the excise cut, which was always going to be temporary, that's pushing fuel prices to around the $2 a litre mark. But the situation still remains very precarious because The flow through the Strait of Hormuz, which accounts for about 20% of the world's oil and fuel supply normally, still remains largely closed. We're seeing volumes only about 10% or less of pre-war levels. And as long as that's sustained, we're going to see increasingly tight markets and therefore inching up oil prices on average.
Okay, so our petrol prices will be heading around that $2 a litre mark. And of course, diesel is always worse.
Yes.
That's right. So diesel and jet fuel have been impacted the most from this crisis and people can see that at the pump. My fear would be that prices can continue to head higher and the idea that we could be at $2.50 is not out of the question within the next several weeks.
Gosh, okay. Well, let's come back to our supply in a moment and what we might see for the remainder of the year. But could you just paint a picture for me, first of all, Sol, so we can actually visualize what is happening with the flow of oil from the Middle East? Because it's not just the Strait of Hormuz that is now being impacted, is it?
That's right. So the way to think about this is about 20% of the world's oil and fuel used to flow through the strait. It has no other way to get to the market. But what we have seen, particularly from Saudi Arabia, which exports close to 10% of the world's production, is they've managed to divert some of their oil. So instead of going through the strait, they've piped it to the west of Saudi Arabia, which is in the Red Sea, further away from Iran, and looked to export the oil that way. So they're looking to export about four to five million barrels, or close to half their production. However, in order to get those volumes out via the Red Sea, they need to go down past Yemen, which is where Iran proxy, the Houthis, are now starting and stepping up their attacks on vessels that way too.
And that's forcing Saudi to try and get those volumes out the long way, which is to go up instead through the Suez Canal into the Mediterranean all the way down the tip of Africa
How has the end of the fuel excise cut affected petrol prices at the pump?
and then up again to get into Asia. And that's adding weeks and a lot of expense to the journey. And the concern for markets is, could we see the Houthis or other Iranian proxies not just attack the tankers, but also look to attack infrastructure like the port which Saudi is exporting its oil out of? And if that happens, then this main way that Saudi Arabia can bypass the block straight is also going to be blocked.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:00–4:38
2
How has the end of the fuel excise cut affected petrol prices at the pump?
4:38–13:20
3
Could petrol really reach $2.50 a litre and what fuels that projection?
13:20–14:46
4
How is the Strait of Hormuz disruption changing global oil flows?
14:46–15:54