Surging Global Oil Prices Hitting Aussie Households at the Pump

A person using a petrol pump in a file photo dated Aug. 15, 2013. (Nick Ansell/PA)

The surge of global oil prices is showing no sign of subsiding as political tensions escalate between Russia and Ukraine, further hitting the wallets of Australian motorists.

Brent crude oil, the international benchmark for oil prices, hit a seven-year high on Monday, trading at above $95 (A$133) a barrel, and experts expect it to soon hit $100 (A$140).

If sanctions are placed on Russia, which supplies more than 10 percent of the world’s oil, it will put heavy pressure on global supply.

In the event of a supply shock, Brent crude could skyrocket to $150 in the first quarter of the year and force central banks to “display less patience than normal,” according to JP Morgan Chase economists.

Ben Cleary, portfolio manager of the Tribeca Natural Resources Fund, said $100 oil was “almost consensus.”

“I think the bigger question is, how high can oil go?” he told The Australian Financial Review. “You will see $200 oil before we see $50 in the next few years.”

The persistent rise in global oil prices is pushing up petrol prices in Australia, further driving up inflation.

The Australian Institute of Petroleum revealed that the average retail price of petrol rose 5 cents to 176.9 cents per litre during the week ending on Feb. 13, a new record.

Further, the weekly average retail petrol price surpassed 180 cents per litre in five capital cities: Melbourne, Brisbane, Perth, Hobart, and Darwin.

Fuel was already the most significant driving factor for inflation, rising 32.3 percent across 2021 and hitting record prices for two consecutive quarters.

Meanwhile, the International Energy Agency (IEA) significantly upgraded its demand estimates amid tight supplies.

It also warned that the Organisation of the Petroleum Exporting Countries’ (OPEC) “chronic underperformance” in supply was putting further upward pressure on world oil prices.

“Global oil stocks at multi-year lows and dwindling OPEC+ spare capacity have left the market with only a small cushion,” the IEA February Oil Market Report said.

While nations outside of the OPEC alliance have been rapidly increasing production, IEA notes the shortfall of global supply is expected to deepen as some OPEC nations struggle with production constraints.

Australia’s crude oil supply is also at worryingly-low levels, with an estimated 68 days left in reserve, the only country with less than the 90 days recommended by the IEA.