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Chapter 1: What is the main topic discussed in this episode?
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Before the war, it was open, safe and toll-free. Now, the Strait of Hormuz has become one of the biggest problems for Donald Trump as he tries to end the conflict. While the global oil supply has been disrupted for months, petrol prices here are now as low as they were before the war began. Today, energy analyst Kevin Morrison on whether that can last. I'm Sam Hawley on Gadigal land in Sydney.
This is ABC News Daily. Kevin, Donald Trump, when the prospect of a deal with Iran first emerged, he told the ships of the world to start your engines and let the oil flow. But clearly it's not really that easy, is it?
No, no. And there still seems to be a lot of nervousness around because despite what Donald Trump has said, the Iranians have said that the Strait of Hormuz is actually closed. There's sort of conflicting accounts of what's really going on.
The initial US-Iran deal, which includes an end to the fighting in Lebanon, appears on the cusp of unravelling. Tehran once again declaring the Strait of Hormuz closed, even as Washington insists it's still open.
Our country's doing so well. Those ships are flowing out of the Hormuz Strait like nobody's ever seen before, actually. There were a lot of them, about 700 of them, and they're pouring out. The oil is all over the place.
The US has said that the ships have passed carrying about 17 million barrels of oil. So that's almost back to where we were before the conflict, which was around 20 million barrels a day.
So when Jaddy Vance, he flew off to Switzerland on the weekend for these talks with Iran, which didn't actually go that well, the Iranians, as you say, they had declared that they had closed the Strait of Hormuz again in response to Israeli attacks against Hezbollah in Lebanon. The Americans then contradicted them and said it was still open.
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Chapter 2: What challenges has the Strait of Hormuz faced since the Iran war began?
But what's going to take time is all those hundreds of ships that have been waiting outside the strait around the Sea of Oman to get in, to load up, because... That whole production supply chain does take a long time in getting back because they've had to shut in oil fields, they've had to shut in gas fields, and you simply just can't flick a switch and expect them to turn back on immediately.
So that all takes days and weeks before that whole process starts. And then with the shipping companies, they've got to kind of form an orderly queue to get in and out because it is a relatively narrow waterway. And now what seems to have merged is there seems to be two waterways, one where the Iranian ships go through and then the other where everybody else goes through.
Gosh, and I've even read actually that some of those ships that were stranded in the Strait for all those months, they've got barnacles underneath them that need to be removed. Like it's all logistically incredibly difficult at this point, not to mention that there is still a concern that there could be sea mites.
This is it. And then that's, again, coming back to the insurers. They don't want to insure a ship that could be blown up by a sea mine. Again, there's conflicting information coming out from both sides. How much is there? How long it will take to clear?
Chapter 3: How have global oil supplies and petrol prices been affected by the conflict?
But again, there's just different information coming out. So it's going to take some time before the mines are cleared.
Yeah. And then, of course, there's this issue, Kevin, of a toll or a fee. Now, Iran seemed to agree not to charge that during the 60 days of this initial ceasefire. But that is still very much a possibility, isn't it? And even now, Donald Trump's saying, well, America will charge a toll. if a firm deal isn't reached after these 60 days, can Iran or, for that matter, America actually do that?
It depends on how they term it, because I think if it's called a toll, I don't think they'd be allowed to do that. Particularly, again, sort of coming back to the insurers, they would not be able to insure a ship that actually pays those tolls because it would contravene the sanctions that are currently imposed on Iran.
I mean, obviously, that's part of the negotiation over the next 60 days, what to do about those sanctions, how they will be lifted and to reintegrate Iran into the global economy. But pre the conflict, there was no tolls. There was no service fees. There was no charges to go through the straits. So it is a major change. And this is another thing that's really emerged from this conflict.
Iran now realizes it has another lever over the world economy, really.
All right, well, Kevin, let's consider now what all of this might mean for us. Now, motorists here could be forgiven for thinking it is situation normal because the government has had this fuel excise relief in place. It's now extended that, of course, at a reduced rate until the start of August.
The federal government is halving its discount to the fuel excise after three months of relief for motorists. The 50% cut that is currently in place, which knocked back prices by $0.32 a litre, will now drop back to $0.16 per litre between 1 July and 2 August.
That has kept fuel prices here down, hasn't it? I mean, they've been looking pretty good, to be honest.
Yeah, and I think what the government has done by extending the fuel excise but halving the amount of the excise is prudent because we've seen oil prices come down here. And so... By reducing the rate of the excise cut, modus won't sort of feel the pain so much. It's also other things that have got to be considered.
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Chapter 4: What conflicting reports exist about the status of the Strait of Hormuz?
So just tell me then the counter to that, the straight remains closed or it fluctuates between being open and being closed. What happens then?
Well, then, yeah, the fear premium is put back on international oil prices. So we could see the Brent crude price go up again. At the beginning of the conflict, people were saying, look, oil prices could go up to over $150 or $200 a barrel. That never quite happened.
And one of the reasons why it didn't happen was a lot of the consuming countries like China and Japan, they dipped into their considerable reserves. And also we had a big release of stockpiles coordinated by the International Energy Agency. So that combination of release of stockpiles and plus China and Japan dipping into their own, that helped cushion the supply gap.
But if the stroke was to be closed again... That option of a further large stock release, particularly coordinated by a DIA, really that's kind of off the table. We've already expended that option. So it will be quite precarious.
Yeah, and we'd need to now really be concentrating on rebuilding our reserves. How long does that take?
Yeah, every country will now want to build a reserve, and particularly Australia will. We saw the government allocate funding for new storage capacity in the budget.
Australia's emergency fuel reserves will be boosted to 50 days. A $10 billion plan to guard against the unpredictable. It includes $7.5 billion for loans for fuel companies to help them boost fuel and fertiliser supply and $3.2 billion to establish a government-owned diesel and jet fuel reserve to tap into during a crisis.
Really, before we were kind of just doing it in an adjusting time basis where, you know, it was more about market efficiency. Because obviously, if you have lots of storage capacity, that obviously costs money. And then that cost is passed on to the consumer. So Australian motors have actually been quite fortunate relative to the other companies. developed countries in the world.
Australia pays amongst the lowest amount for petrol. I guess only the US and Canada actually sort of on average pays less than Australia. But both those countries are exporters, whereas Australia is completely reliant on imports. So if we start spending this $10 billion on extra storage capacity, that cost is going to eventually be passed on to consumers.
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