Fuel prices soar but government rules out relief

By Catherine Bouris 

Motorists around the country are facing almost-record-breaking fuel prices as the conflict in the Middle East continues to escalate.

The US war with Iran is causing ongoing chaos in the Strait of Hormuz and fuel supplies have been further impacted by a drone attack on Saudi Arabia’s East-West oil pipeline, prompting global oil prices to surge..

The average fuel price in Sydney has jumped by more than 20 cents in the past week, with the cost of unleaded 91/E10 petrol sitting at $2.34 a litre.

Commodities experts at the Commonwealth Bank estimate that oil markets have five 10 weeks before global oil and refined product inventories deplete, which could send the cost of oil skyrocketing to as much as $US150 a barrel.

If that happens, fuel prices could climb by another 40 cents a litre, AMP chief economist Shane Oliver said.

“If the East-West pipeline remains shut and the flow of oil remains limited through the Strait of Hormuz… you can’t keep running down global oil reserves forever. Eventually the world would have to adjust to a lower supply,” he told AAP.

Despite the price increases, the federal government is not currently considering cutting the fuel excise.

“We’re providing cost‑of‑living relief in other permanent ways,” Treasurer Jim Chalmers told reporters on Friday.

He also acknowledged that the war in Iran had been disastrous economically.

“Right around the world, ordinary people are being absolutely smashed by the consequences of the war in Iran, and unfortunately Australia is no different.”

Mr Oliver said cutting the fuel excise would be costly for the budget without solving the problem.

“We did it six months ago and it just provided temporary relief and here we are going back up again,” he said.

NRMA spokesperson Peter Khoury said what was really needed to provide relief at the bowser was a de-escalation of violence in the Middle East.

If that were achieved, “what we’ll see is those prices go back, that’s how volatile they are,” Mr Khoury said.

“The markets are responding pretty quickly to what’s going on, but until that happens, unfortunately we’re going to continue to see these high prices.”

Iranian forces today  say they have struck an oil tanker trying to transit the Strait of Hormuz while hundreds of thousands of people rallied in Tehran in the largest show of support for the government since the United States and Israel launched attacks in February.

Iran’s state broadcaster cited the Islamic Revolutionary Guard Corps as saying the Togo-flagged oil tanker Trend was struck due to what it described as an “illegal attempt” to pass through the strait.

The Guard’s navy warned that vessels attempting to pass through the strait without authorisation would face “destruction,” the broadcaster said.

Iran has asserted control over the waterway since the US and Israel launched the war on February 28.

The United Kingdom Maritime Trade Operations (UKMTO) reported a “security incident” overnight involving a vessel 16 nautical miles northeast of Khasab, Oman, which lies on the other side of the strait.

The crew was safe and no environmental impact was reported, the monitor said.

It was not clear whether the UKMTO report referred to the attack claimed by Iran.

The US military has been escorting some commercial ships through the strait off Oman as the threat of Iranian attacks continues.

Separately, the UKMTO said a tanker in the strait was hit by an “unknown projectile,” causing a fire that was later extinguished.

The crew was reported safe, with no immediate indication of environmental damage, it said.

Hundreds of thousands of Iranians filled the streets of Tehran in the biggest rally since the war began in February, pledging to take up arms as “Janfaday-e Iran,” or those “who sacrifice their lives for Iran”.

Iran’s government has sought to rally the people and stress unity even as the economy worsens under a US naval blockade of Iranian ports and new US sanctions.

Some participants trampled flags of the US and Israel.

Others chanted “Death to America” and “Death to Israel”.