Aussies could be hit with fuel rationing measures as early as September, energy experts are warning, as a second closure of the crucial Strait of Hormuz shipping lane threatens a fresh global oil shock.
Global oil prices cracked US$90 a barrel overnight on Monday, marking a 15 per cent jump since hostilities reignited between the US and Iran last week which led to the closure of the Strait of Hormuz where 20 per cent of the world’s oil and gas passes.
“If the Strait remains closed, then by September, the risk that Australia will have to pursue some form of demand management or rationing grow significantly and, to give it a magnitude, it’s probably two to three times the risk of what we saw in March and April,” MST Financial senior energy analyst Saul Kavonic told News Corp.
“Australia’s fuel stock is actually higher than it was prior to the war, but they’re still very low by global standards.”
In March and April, the sudden outbreak of the Iran war pushed unleaded petrol to more than $2.50 a litre, while diesel hit $3.20 on April 1.
This time around could be more dangerous, Mr Kavonic warned, because the world has already drained a huge release of oil reserves and now there’s little left to draw on.
“So far we’ve been living off the oil market credit card,” he said.
“We’ve only managed to get through the last few months by drawing on the stocks that we have, so we’re on borrowed oil.
“And that credit card will max out within a few months if we continue to borrow the way we have because the Strait remains closed.”
Australia has been comparatively shielded to date because poorer countries have “taken the hit” of demand destruction – which involves rationing fuel by altering regular daily life to reduce fuel consumption like working from home or catching public transport.
“A lot of other countries have had demand rationing measures put in place and in fact, that’s the reason we’ve got through this,” Mr Kavonic said.
“Now, what happens over the next few months if the Strait remains closed is, our ability to continue to borrow oil stocks drops and therefore, the amount of rationing that has to happen around the world will increase.
“China and South Asia have already reduced their demand a lot and it’s unclear they could do that much more.”
As of Saturday, Australia had 46 days worth of petrol, 39 days of diesel and 34 days of jet fuel.
“What that means is that we currently have 6.5 billion litres of fuel in Australia in total, across all fuel types, which continues to be more than we had at the start of this conflict,” Prime Minister Anthony Albanese said in Sydney.
He said the government would ‘continue to closely monitor’ developments in the Strait.
The government’s National Fuel Security Plan, launched in April, outlines four settings in response to the energy crisis.
We are currently at Level 2, which states the government is taking “precautionary actions to shore up fuel supply” and Aussie consumers should “only buy the fuel (they) need” and “make voluntary choices to use less and avoid the impact of higher fuel prices”
Level 3 calls for “voluntary practical measures” to limit fuel use, while Level 4 calls on the federal and state governments to implement “stronger demand measures” to make sure “fuel is available for critical users, such as life supporting services, utilities or emergency services”.
Retired Air Vice-Marshal John Blackburn AO, who spent years warning of Australia’s tenuous fuel security position, now says the country has no choice but to ride the “tsunami” of the energy shock.
“It’s like you’re in the front of a wave, a tsunami, and you don’t want to fall off it, but man, you can’t do anything but ride the wave,” he said.
Prices will likely rise over the coming months, he said, even if government-mandated rationing measures don’t eventuate.
“Price rises in the end is market control, not done by government, but people change their consumption behaviours,” he said.
Alongside petrol, diesel – the workhorse fuel of Australian mining, trucking, agriculture and industry – is surging higher on supply disruptions from Russian export bans and refinery damage in the Middle East.
Mr Blackburn said the government would need to step in and extend the fuel excise cut to prop up these businesses.
“Our country needs those small trucking companies to move things, particularly in rural areas and in the regions, and the price increase has had a massive impact on them,” he said.
“They buy fuel on credit. So their credit limits will soon get blown out if the fuel goes up by a huge amount and the cost of their operations rapidly increases. They are the ones supporting logistics systems and farms and everything else.”
News Corp understands the government has no plans to extend the cut beyond August 2, but it will retain some flexibility on the policy due to the volatility in global energy markets.
“From an economic point of view, a proper and permanent end to the war can’t come soon enough,” a Treasury spokesman told News Corp.
“Australians have already paid too hefty a price for this on-again off-again conflict on the other side of the world.
“The longer this drags out the more serious the consequences for inflation and growth here and around the world.”
Extracted in full from: https://www.couriermail.com.au/business/economy/australian-economy/strait-of-hormuz-20-fuel-rationing-could-hit-aussies-in-september/news-story/36bc1df0445c494d2356c4eac7212568
