Diesel prices are surging, petrol expected to jump above $2 a litre amid Middle East conflict
Wholesale diesel prices surged overnight as NRMA warned the increases could worsen cost of living pressures unless the Middle East conflict is resolved.
Surging petrol and diesel prices threaten to stoke cost of living pressures across Australia if the Iran war spreads across the Middle East, according to motoring group NRMA.
On Tuesday, NRMA spokesperson Peter Khoury warned that the Middle East conflict created a surge in wholesale diesel prices overnight, with the fuel critical to Australia’s mining, transport, agriculture, commercial, retail, and industrial sectors.
Gas and oil were “worrying”, Mr Khoury said.
Sign up to The Nightly's newsletters.
Get the first look at the digital newspaper, curated daily stories and breaking headlines delivered to your inbox.
By continuing you agree to our Terms and Privacy Policy.“The benchmark price for diesel jumped $US22 a barrel last night, or 24 per cent, and it’s unclear why there was such a big increase.”
“Diesel is key to the global industrial economy, so it’s reaction tends to be more extreme in times of stress, but if diesel prices go up significantly it’s a big problem for the Australian economy. It could push supermarket and transport prices higher,” he said.
Mr Khoury also warned on Tuesday that the wholesale price (terminal gate price) for regular unleaded petrol jumped another 4 cents a litre overnight on Monday, or a rise equivalent to $US6 a barrel ($8.44) for the Tapis benchmark used across the Asia Pacific.
“These prices will probably rise again tonight,” he said. “Now we can only wait and see what happens over the next few days and weeks. If the Middle East de-escalates we hope prices will drop back. We had 14 months of pretty stable petrol prices in Australia, which is unheard of and last week we were paying almost the lowest since COVID. But on Saturday that all changed, it takes seven to 10 days for (wholesale) oil prices to flow on to bowser prices, so we don’t want to see increases overnight as families are struggling.”
Prices climbing
NRMA’s latest weekly fuel report showed unleaded petrol prices jumped 25.8 cents a litre over the past week in line with surging oil prices as traders priced in the risk of a Middle East conflict.
The motoring group now predicts the oil price shock means regular unleaded fuel will now rise to the low $2 mark this week, as benchmark Brent Crude prices climbed around 8 per cent to $US78.80 since the start of the conflict on Saturday. In a worst case scenario, it said Premium 98 unleaded fuel could hit a high of $2.28 a litre this week, with the budget E10 unleaded fuel forecast to reach a high of $2.01 at the bowser this week.
On Monday, Iran warned any shipping attempting to sail through the Strait of Hormuz faced being attacked, with the waterway offering passage to 20 per cent of the world’s oil supplies.
AMP economist Shane Oliver says that every $10 rise in global oil prices equates to roughly an extra 10 cents a litre paid by motorists at the bowser.
If oil prices topped $US100 a barrel a then prices could then hit an average of more than the $2.20 a litre, at a level motorists last faced in 2022 after Russia invaded Ukraine.
Airfares soar, UAE still open for business
The war with Iran has also unleashed global travel chaos as more than 3400 commercial flights are reported to have been cancelled since the conflict’s eruption, with airfares soaring for Australians looking to travel to, or from, the Middle East and Europe.
Dubai Airport alone has cancelled 1200 flights since Saturday amid reports emerging of surging airfare prices for travellers seeking alternative routes between Australia and Europe.
Foreign Minister Penny Wong said the government is undecided on whether to offer Australian citizens emergency repatriation flights out of the region due to the rising risk safety risks.
Around 115,000 Australians live in the Middle East, with the majority waiting the conflict out.
On Tuesday one of Australia’s top business figures in the region, Ellecia Saffron, said life and business are largely continuing as usual aside from closed airspace and staff working from home.
Ms Saffron is an an advisory board member to the Australia UAE Business Council and Deputy Chair of the Australia Institute of Company Directors, Middle East Advisory Committee.
“From my perspective on the ground, Abu Dhabi and the UAE is operating business as usual,” she said. “The response has been calm, peaceful, coordinated and very effective, and this is reflected in the continued smooth functioning of business and daily life across the country.”
On Monday, the US State Department warned its citizens to urgently depart more than a dozen Middle Eastern Countries including the United Arab Emirates, Saudi Arabia and Qatar.
