Fuel prices surge as Middle East war drives oil above $US100, boosts Woodside, Santos and coal stocks

Coal and gas were once regarded as yesterday’s fuel. The war in the Middle East has demonstrated how reliant the world remains on fossil fuels.

Benchmark Brent crude prices have jumped 26 per cent since the start of the conflict, from around $US80 a barrel to $US101 a barrel, and global gas, diesel, and coal prices have surged too.

The winners in the S&P/ASX 200 Index from the war include oil and gas giants Woodside and Santos. Both have jumped more than 15 per cent over the past month. Coal miner Yancoal has risen 27 per cent and New Hope Corp 10 per cent.

“There’s definitely money to be made in coal still,” said Richard Hemming, the founder of the Under the Radar Report. “With or without the war, demand for coal isn’t going away.

“There’s new coal-fired power station builds in Asia and they need lots of cheap power in India and China. So, there’s lots of noise about decarbonisation, but look at the shock we’ve had it shows how much the world still needs oil, gas and coal.”

Shares in Shell Coles and Reddy Express operator Viva Energy have jumped 20.3 per cent over the past month to $2.08 as investors anticipate the war on Iran will help it post stronger profits this financial year. Shares in fuel retailer Ampol have jumped 10 per cent over the last month.

Union slams war’s potential windfall profits

The potential for windfall profits has angered the Australian Council of Trade Unions (ACTU), which is demanding tax law changes.

The ACTU wants the Petroleum Resource Rent Taxes (PRRT) system changed to tax gas companies on 25 per cent of their sales earned, rather than the current system where tax liabilities on profits can be offset by prior capital losses.

“While working people pay the price for fuel supply shocks at the bowser, rising oil and gas prices will generate windfall profits for Australia’s major oil and gas exporters like Woodside and Santos,” said ACTU president Michele O’Neil.

The political debate around tax and spending reforms may step up a gear on Tuesday, given the RBA is widely expected to raise benchmark interest rates by 25 basis points to 3.85 per cent, partly in response to the rising energy prices stoked by the Middle East war.

Other companies are also in focus for alleged profiteering from the war. Last week, the Labor Government ordered the Australian Competition and Consumer Commission (ACCC) to monitor fuel service stations’ compliance with obligations not to profit-gouge via higher bowser prices.

Uranium tipped

Leaving aside the political debate, other investors believe the war is likely to support the push to nuclear energy as a long-term solution to meet power demand and get off fossil fuels.

Guy Keller, a portfolio manager at Tribeca Investment Partners, said he likes several ASX-listed uranium miners after recently returning from a research trip across Namibia’s uranium mines that included visits to mines belonging to Paladin, Bannerman, Deep Yellow, and Elevate Resources.

“The first responders to this war have been oil and gas stocks, but the fundamentals for uranium are strong as a long-term solution to soaring energy demand, including for AI,” argued Mr Keller.

“I think uranium’s attractive,” he said.

“Sure, it hasn’t moved like coal or gas prices, but the war won’t last forever. Right now, on the ASX the cashflow generating uranium plays on my radar are Paladin Energy and Peninsular Energy. I was at Paladin’s site not long ago and it’s now through a lot of its production issues. Peninsular Energy’s ramping-up production and still extraordinarily undervalued.”

At Tuesday lunchtime, the S&P/ASX 200 Index traded flat at it looked to avoid its fourth straight day of losses amid worries about the impact of the Middle East war and rising interest rates in Australia.

The benchmark share index is now down 6.6 per cent since the war’s February 27 outbreak.