Aussie motorists told to fuel up now as Iran-Israel conflict escalates
With the price of Brent crude oil hitting a three-month high over the weekend as the Israel-Iran conflict escalates, surpassing $US80 a barrel, motorists are being urged to fill up.
'We will start to see the prices increase, but they are nowhere near as high as other economies have predicted,' NRMA spokesman Peter Khoury said.
Mr Khoury said while the price of petrol was going up, it was not as much as some motorists feared, with on average drivers likely to pay 8 cents more a litre when fuelling up their car.
'Our regional benchmark – Malaysian Tapis – closed at $77 a barrel and we do expect it to go higher when the markets open tonight,' Mr Khoury said.
'But to put it in perspective, when we saw those really horrible record high prices back when Russia invaded Ukraine, Tapis was trading at $133 a barrel.'
Australia motorists' fuel costs are based on Malaysian Tapis crude oil prices.
While Tapis crude oil prices are influenced by the same factors as US brent crude oil prices, they do not necessarily trade at the same price.
The price of Brent crude oil spiked to $US80 a barrel over the weekend after the US attacked and 'completely obliterated' three nuclear sites in Iran.
Traders were worried about two major potential escalations in the conflict, with either the closure of the Strait of Hormuz or an all-out regional war negatively impacting the price of oil.
Cutting off the Strait of Hormuz could send the price of oil above $US100 a barrel, as the 32km mile stretch is the primary route of exports from Saudi Arabia, Iraq, the UAE, and Kuwait.
But the passage that feeds the world with about 30 per cent of its oil supply is still open, at least for now, pending a final decision by Iran's Supreme Council after Iran's parliament voted to close it.
Mr Khoury said it was important that Australians educated themselves before they filled up, with motorists in Sydney facing the bottom of the cycle, while Perth prices are set to fall on Tuesday.
'The reason I say that is because there is always a spread of prices,' he said.
'People are really surprised. We've had people say I thought the prices would be sky high and they are not.'
Like an interest rate rise
Higher petrol prices could act like an interest rate rise, as Aussies would have to spend more at the pump.
Independent economist Saul Eslake said what happened next was unknown, but two scenarios could impact the Australian economy.
'One is the Iranians either choose to or find they can't do anything at all to which oil could fall back relatively quickly,' he said.
'On the other hand if they block the Strait of Hormuz, then the oil price could rise above $US100 a barrel, which while the world doesn't end it gets uncomfortably high.'
Mr Eslake said the spike in oil prices was unlikely to move the Reserve Bank of Australia on interest rates in the short term.
'The RBA will look through the initial spike in oil prices, as it gets taken out through trimmed mean inflation rate,' he said.
'In a sense, higher oil prices act like an increase in interest rates; that is, to say people spend more on petrol and (have) less to spend on everything else. It's kind of the same way interest rates work.'
Originally published as Aussie motorists told to fuel up now as Iran-Israel conflict escalates
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