Fuel prices are under control at the moment. But three key factors are about to be combined and the impact on Australian households could be devastating.
When it comes to the impact of inflation on our daily lives, there are few things that can cause such immediate frustration as the cost of the price of gasoline and diesel.
With the price of lights at least every few miles in most of our big cities, it is a constant reminder of how our purchasing power is in the face of rising cost of living.
However, despite the fact that 95 unleaded octans have averaged about $ 2 per liter nationally in recent weeks, fuel prices are currently enjoying the impact of three main factors that keep them lower than they would be otherwise.
But all good things must end in time, and it is the cessation of these same three things that could be a disaster for our bowser portfolios.
A home tax cut
Since the Morrison government’s halving of the federal government’s excise tax on March 30, gasoline and diesel prices have been 22 cents a liter lower than they would have been otherwise.
On March 17, 95 unleaded octane reached a high of $ 2.19 per liter in the country’s capitals. Since the reduction in excise duty on fuel, the highest average price recorded in the capital has been $ 2.08 per liter for 95 octane without lead.
Without the reduction in excise tax, we would have seen a record national average of $ 2.30 per liter for 95 octane without lead.
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But because Australia enjoys a little respite from rising fuel costs, it’s a very different story from the vast majority of the rest of the world. In recent weeks, the United States and the United Kingdom have reached record highs for gasoline and diesel prices, although oil prices are well below their March high of $ 129 a barrel.
While there are a number of reasons for this historic divergence between fuel and oil prices, an important factor is possibly that the world is trying to adjust to fewer Russian oil and fuel exports.
But like all good things, the reduction of the excise tax on fuels will end on September 28, when fuel prices will rise by 22 cents per liter. Depending on the state of world oil markets at the time, Australians may see another record in the cost of fuel at the pump.
Release of oil reserves
Almost at the same time as the Morrison government reduced the excise tax, the Biden administration embarked on its own attempt to address the high fuel costs in the United States, with the release of oil from the United States. US Strategic Oil Reserve.
The idea was that releasing a million barrels a day from the reserve, or about 1 percent of normal global consumption, would help push down oil prices. The current release of reservations is scheduled to end on September 27th.
While the impact of the release of vacuum reserves was not expected to have a shifting impact on oil prices, when combined with other headwinds in the market it has helped keep prices lower than they would have been. otherwise.
The impact of Covid
Since China entered its last and longest round of Covid-driven blockades and movement restrictions, its demand for oil has fallen significantly, helping to push down prices globally.
According to Chinese National Bureau of Statistics, the production of distillates (gasoline, diesel, aircraft fuel, etc.) from Chinese oil refineries fell by almost two million barrels a day since from the peak of refining activity in the middle of last year.
The Chinese government is currently trying to restart its economy, with a 33-point recovery plan and a lot of rhetoric about how the economy will recover from the blockade. It is questionable whether this plan will succeed in returning China to normalcy, but it is worth exploring a scenario in which its efforts will be effective.
A total recovery of the Chinese economy would conservatively increase oil consumption by about 1.5 million barrels a day. Put that together with the end of U.S. emissions from strategic oil reserves and that’s 2.5 million barrels or about 2.5 percent of the world’s consumption to be found.
An Australian perspective that is already challenging
As reported by news.com.au earlier this week, parts of the country are already facing serious challenges with energy prices. Australian gas prices are generally around $ 3 per gigajoule (GJ), but this week soared to more than $ 380 per GJ.
By 2022, wholesale electricity has risen more than 140 percent and if gas prices remain high, they could rise further.
In the midst of this already challenging context, the conclusion of the reduction of the US excise tax and the release of US strategic oil reserves could be another obstacle for Australian households, unless the issue of high World oil prices will be addressed in late September.
A possible reopening of the Chinese economy and its impact on global energy demand is also a wildcard that could put more upward pressure on energy prices, but whether or not it will occur remains low. a big question mark.
Despite paying more than $ 2 a liter for normal unleaded product in recent weeks, Australians have enjoyed a bit of the country’s fortunate fortune to dodge record petrol prices, at least for now.
Ultimately, over time, the factors that support the lowest fuel prices for Australians will come to a conclusion, but where the fuel prices will be when that time comes is a really open question.
Tarric Brooker is a freelance journalist and social commentator @AvidCommentator
Read related topics: Cost of living