PETROL
Iran has moved to choke the world’s oil supply by shutting down the Strait of Hormuz.
This has sent the price of crude soaring – and while it’s bad news for most countries – it’s particularly worrying for Australia.
The price of fuel has already started to surge in Australia and experts say it’s likely to get much worse if the conflict continues.
Regular unleaded in Sydney has jumped from an average of $1.56 a litre in mid-February to well above $2.50.
To make matters worse, panic buying in regional areas has triggered further price hikes – and even caused some petrol stations to run out of fuel completely.
The problem is that Australia’s refining capacity has shrunk dramatically in the last 20 years, with just two refineries still operating – Ampol’s Lytton facility in Brisbane and Viva Energy’s plant in Geelong.
These facilities supply less than 20 per cent of national fuel demand, meaning more than 80 per cent of Australia’s liquid fuel is imported already refined.
Most of this comes from Asian refining hubs including Singapore, South Korea, Japan, Malaysia and Vietnam.
This leaves Australia highly exposed at the end of a long and fragile supply chain, dependent on Middle Eastern crude, overseas refineries and international shipping, with limited domestic backup if any link fails.
Australia had held about 1.6 billion litres of petrol – a 37 days’ supply – along with 30 days of diesel and 29 days of jet fuel.
To bolster supply, the Albanese government has temporarily relaxed fuel quality standards, allowing higher-sulphur petrol into the domestic market and boosting supply by about 100 million litres a month.
But is this enough if the situation in the Middle East gets worse?
National Farmers’ Federation president Hamish McIntyre has warned fuel prices could rise by 40 to 50 per cent if global supply disruptions persist.
Transport Minister Catherine King said the longer the war continues, the greater the economic fallout is likely to be across the Asia-Pacific region.
Analysts at Morgan Stanley predict Australia can absorb diesel import disruptions of about 26 per cent, but added that deeper cuts could force industrial shutdowns.
On March 19 however, Prime Minister Anthony Albanese warned against ‘panic buying’ and reassured Australians that ‘Our fuel supply is currently secure’.
GROCERIES
Australians can also expect to shell out more for their groceries if the war rolls on.
That’s because we rely on the UAE, Qatar, and Saudi Arabia for more than half of our nitrogen fertiliser – known as urea.
At the moment Gulf states are under attack by Iranian missiles and drones – and the production – as well as the export of fertiliser is under threat.
Farmers in Australia use nitrogen fertiliser for just about everything.
Cereals and grains, green leafy vegetables and other high-demand crops like corn, potatoes, tomatoes, and canola.
This will mean everyday items like bread, breakfast cereals and worst of all BEER could shoot up in price.
It’s enough to make you want to pack up and leave Australia, but unfortunately, that might be a problem too.
TRAVEL
International travel has been thrown into chaos with the world’s busiest airport Dubai hit by Iranian drones on at least three occasions.
As of mid-March, about 50,000 flights have been cancelled because of the conflict and this has impacted more than 6 million travellers worldwide.
This capacity squeeze has put tremendous strain on airlines across the globe as carriers have had to wade through the back log of stranded passengers then re-book and re-route flights.
Much of the airspace over the Middle East is now closed to commercial jets, so airlines are forced to bypass places like Dubai, Doha and Abu Dhabi and stopover in Asian airports like Bangkok and Singapore – or in Southern Europe.
Compounding the problem for holidaymakers is the price of jet fuel which has doubled since the conflict began – so even if you are travellling domestic nowhere near the conflict zone – the price of a ticket is likely to be a lot more.
So far, flights from Australia to Europe have increased on average by about 30 per cent and this is only expected to get worse if the war drags on.
POWER BILLS
Now, we know that oil is being significantly impacted by the crisis – but so is the production, supply and export of another major energy source – natural gas – and that means much higher power bills.
The world’s largest liquid natural hub in Qatar – responsible for more than 20 per cent of the globe’s supply – was hit with ballistic missile strikes from Iran on March 19, sending the price of LNG soaring – more than double before the war began.
Experts warn it could take years for the Ras Laffan facility to come back online – with the Qataris reluctant to make any repairs until they’re assured there won’t be any further strikes.
This has raised fears of a global gas shortage.
Why this is a problem for Australia is because about 25 per cent of our energy generation comes from liquid natural gas.
And because of the impending scarcity – prices will continue to rise – pushing electricity bills higher and higher.
But, it’s not all bad news.
Australia is the world’s second-largest producer of LNG responsible for about 20 per cent of the world’s supply – so our exporters will benefit greatly from the higher prices and have to pay more tax.
So it is possible that to help alleviate the pressure on households, the government could take those extra tax dollars and offer some kind of electricity rebate scheme.
But… I wouldn’t hold your breath.
RETAIL GOODS
Rounding out our very depressing list is retail goods – particularly if you buy anything on Amazon, Ebay or Temu that arrives here on a ship.
Cargo freighters are powered by diesel and the price is shooting up, making international shipping more expensive.
If you might think you can escape the price hikes by buying locally – you might be disappointed.
Australia imports about $309billion dollars a year in physical retail products.
So even if you walk into Bunnings and grab something off the shelf – It’s likely the item has been shipped here from overseas.
You can also expect anything made of plastic to increase in price – everything from Barbie dolls to building materials.
That’s because plastic is produced by petrochemicals and the cost is rapidly rising.
