OPEC+ slashes output on global recession fears; Australian motorists to be spared Easter pain
By Sourced Externally
April 4, 2023
Australians setting off for Easter holiday road trips are likely to be spared any immediate hit from a decision by the global oil cartel to cut production in a bid to boost sagging prices.
Global oil cartel known as OPEC+ announces it will slash production by one million barrels a day
The decision is aimed at propping up prices for crude
Benchmark oil prices shot up eight per cent on Sunday’s announcement
But motorists are being warned they face eventually paying more at the bowser than they otherwise would have after the group known as OPEC+ resolved to slash oil output by a million barrels a day.
In a move that caught Western governments by surprise, a bloc of major oil producing nations led by Saudi Arabia announced they would cut production about five per cent each.
The decision sparked a surge in crude oil prices, with international benchmarks such as Brent rising about eight per cent to trade at over $US86 a barrel.
It follows a period of relatively subdued pricing in oil markets, which had been trending lower since Russia’s invasion of Ukraine in February last year sent prices soaring and inflicted pain on motorists across the world.
The Australasian Convenience and Petroleum Marketers’ Association, which represents the owners of services stations, said consumers were likely to avoid any immediate effects from the production cut.
Drivers justifiably ‘irked’
Mark McKenzie, the group’s chief executive, said it typically took a month or more for wholesale market prices to flow through to the bowser, where consumers were on average paying less than $2 a litre for unleaded petrol.
He said the cuts amounted to a “tweaking” of global output, which hovered around 100 million barrels per day.
However, Mr McKenzie said the decision by OPEC+ would undoubtedly drive oil prices higher than they otherwise would have been.
“People in OPEC have no regard to the fact Australian motorists are going off on their Easter break,” Mr McKenzie said.
“We don’t even figure in their conversations — these are macro issues that relate to the global market.”
According to Mr McKenzie, consumers could reasonably feel “irked” at OPEC’s decision, given the fact petrol prices were already relatively high and cost-of-living pressures were adding up.
Despite this, he said people were paying less to fill up than they were six months ago even though they were subject to the full rate of fuel excise, which the then Morrison government temporarily halved to 22.1 cents in March last year.
The excise reverted to the full rate of 44.2 cents a litre in September.
“If you go back to where we were just six months ago … we were seeing prices at $2.18-$2.20 for regular unleaded,” he said.
“We were seeing prices of premium up in the low $2.40s and we were only paying half the excise.
“So, yes, there’s certainly [a] sense here of feeling irked because the global market is going one way when all of us as consumers want it to go the other way.
“But the price of fuel at the moment is substantially below where it was this time six months ago, and certainly well below where it was at Easter last year.”
Oil prices ‘higher long-term’
Mr McKenzie said the members of OPEC+ were motivated to cut production amid concerns about the risks of a global economic slowdown — or even recession — later in the year.
He said such a slowdown would weigh heavily on oil prices, which were dragged lower by the fall of Silicon Valley Bank in America and the implosion of European banking giant Credit Suisse.