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Chapter 1: What is the main topic discussed in this episode?
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This podcast was produced on the lands of the Awabakal and Gadigal people. G'day, Matt Bevan here, this is If You're Listening. I got a message on the weekend from a listener who said that there should have been some kind of warning before Thursday's episode on Australia's history of gas deals, making sure people had taken their blood pressure medication before listening.
And judging by the flood of emails we've had since that episode aired, it seems that a lot of people feel the same way. There's real frustration that as a resource rich country, Australia isn't faring better in this crisis. At the moment, we are still relying on oil that passed through the Strait of Hormuz before this whole crisis began.
The last tankers to leave the Persian Gulf before the conflict are set to arrive in Australia right about now, this week. But it's not just the domestic situation that's making hair stand on end. The entire global energy market seems to be losing its mind. We're recording this at lunchtime on Monday the 20th of April, and the price of oil is about 95 US dollars a barrel.
But by the time you're listening to this, it could really be anywhere between 80 and 120 dollars. The US stock market is up about 10% over the last week or so, but it could be about to drop depending on how peace negotiations in Pakistan go over the next few hours. The volatility is extraordinary.
To help us make sense of all of this, or at least try, I'm joined by ABC senior business correspondent Carrington Clark. He hosts the ABC's two newest podcasts, ABC Business Daily and Fuelcast. He also used to be the ABC's North America correspondent based in Washington, D.C. So there may be no one at the ABC better place to talk about this than Carrington.
Carrington, hello. Gosh, I mean, I hope I can live up to that introduction. I will try my very best, but no guarantees given that I will be able to make sense of this because smarter and much better paid people than I are struggling to understand exactly what's going on.
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Chapter 2: What is the current state of Australia's fuel supply?
actually both fired at an Iranian flagged cargo ship and then took control of it.
Vacate your engine room. Vacate your engine room. We're prepared to subject you to disabling fire.
So you've got live fire once again, either in the Strait of Hormuz or around it. Ships can't pass through. There is no normalization. And so this huge plunge that we saw, particularly of the oil price, because of the strait apparently being opened up,
was reversed well it was half reversed is what i would say so we dropped about 10 it's gone up about five to six percent again which does still suggest that markets are more positive than they were before last weekend about the situation but i don't really understand exactly why that would be exactly why why are people thinking that
We can believe anything that either side is saying is the thing and people are betting on it, putting huge amounts of money into the market based on the word of people that we know have been wrong many times lately.
So I think part of what is going on is the pervading kind of wisdom in markets has been that Donald Trump's instincts are to be making policies that make people more money. He is obsessed with being the president that oversees a rising stock market.
If you look at the stock markets up. Everything's doing really well.
He was talking about this even last week, about stock market going over 7,000 points. This is the S&P 500 above 7,000 points. The NASDAQ hitting all-time records. This is something that means something to him, and he uses it as a gauge of his success. So what investors seem to be betting on
is in the end what he will want to do is the thing that makes companies more money and makes the stock market go up.
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Chapter 3: How is the global energy market affecting Australia?
The Strait of Hormuz is still closed. We will open it by the order of our leader, Imam Khamenei, not by the tweets of some idiot.
The straight will not be opened by the tweets of some idiot. And the interesting thing, of course, was that there was then subsequent debate about which idiot he was talking about, whether it was the Iranian foreign minister or whether it was Donald Trump. Yes. But the idea that due to some agreement reached in Islamabad, suddenly, oh, yes, straight's open. all good.
Everybody's going to pack up their stuff and put it away and it'll all be back to normal. Seems potentially not the way it's going to roll.
Yeah, I think that's right. Donald Trump likes to talk about there having already been regime change. Most experts say that is not the case. Yes, there have been leaders killed, but the regime, the Islamic regime is still in place and is in control of the country. And their confusion perhaps about Exactly who has ultimate say.
Because at the moment, we don't even know if the Supreme Leader is healthy. There's rumours going around that he's in a coma or that he's gravely injured. And that sort of leaves it in the hands of individual boat captains to decide what they are and are not going to shoot at. It's extraordinary. The other interesting thing, and I hate to get into nerdy economics chat with you, Carrington.
Oh, please do. You were saying that 20% of the world's oil and gas comes out of the Strait of Hormuz. The price of petrol has gone up way more than 20%. So I think there's a lot of confusion as to exactly what the prices that we're paying for fuel mean and what that price signal is trying to do in terms of bringing down demand. Can you explain your understanding of what's going on?
In the end, the iron laws of economics should win out, right, which is prices about the crossover between supply and demand.
One of the reasons this is a confusing market is that we talk about the futures price for Brent crude, which is the numbers that most people get quoted, but it's also been noted that the spot price – so how expensive is it for me right now to try to buy a tanker worth of crude that's easily available –
The difference between those two prices actually has exploded because there's a real premium on getting it right now as opposed to agreeing that I'm going to get it in June or July. And so we're seeing quite huge dislocations in the market because of that. The oil market is also particularly complicated, right, because it doesn't even really pretend to be a free market.
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Chapter 4: What role does the Strait of Hormuz play in oil supply?
It has been interesting watching how this has played out kind of in real time, right? Because at the beginning, I think the government's focus was on trying to assure people that there's plenty of fuel, you're not going to run out of fuel, calm people down so that we didn't see a run on petrol stations. The government also very firmly rejected suggestions at the beginning about
of this price surge that Australia needed to have a bigger reservation of fuel. We talk about the 90 days recommended by the International Energy Agency. The government said, well, that's too expensive. It's $20 billion. We can't afford that effectively. I think that is maybe changing. The speculation is that perhaps the government will be looking at a bigger reservation.
This does feel like an inflection point when it comes to, for example, the uptake of electric vehicles. We're seeing a huge increase in both inquiries about electric vehicles but also purchase of electric vehicles. So I think that is interesting. I probably see some things, it sounds like, around the tax breaks for electric vehicles potentially. But I think, yes, this obviously...
it made very clear to people about how vulnerable we still are to oil price shocks and how vulnerable we are to any cutoff of supply of refined fuels. And obviously the question about, well, does Australia have enough refinery capability if we've only got two left? We used to be an exporter of oil and now we're reliant on the import of crude oil for those refineries, but also of refined petrol.
So I think those are interesting questions. Many people would say, well, this should motivate us to move even quicker towards renewable energy here in Australia. Now, Australia is a major energy exporter. We like talking about this of coal. We export natural gas. We also export uranium. You know, we are a massive energy player. But here at home, we are still...
reliant on these refined fuels from elsewhere. The question is, how do you mitigate against that risk and how do you ensure that you aren't as vulnerable? I think that'll be part of the question for the government as they try to shape this budget.
We talked a little bit about this last week. There is electrification of passenger vehicles and of small vehicles, but A few people have contacted us to say that I wasn't quite right in saying that we don't really have any short, medium or long-term plans to replace diesel as the source of power for our logistics sector and for our agricultural sector and that kind of thing.
I possibly was wrong in saying long. There obviously are some discussions about electric-powered trucks and electric-powered farm machinery and that kind of thing, but it's still not something the government is looking at investing in. replacing our fleet of trucks with electric trucks in the foreseeable future, at least.
We can talk as much about electrification as we want, but in terms of these other sectors, we're going to still need diesel for a while. I think that's right.
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