WAR in the Middle East is having direct impacts on the prices of basic commodities in Australia, including petrol and other fuels that keep the local economy going.
Almost overnight, the geopolitical shape of the world instigated panic that filtered through global supply chains.
Unleaded petrol is now averaging over $2/litre across the Myall Coast, Port Stephens and beyond, hurting many locals already on tight incomes thanks to the cost-of-living crisis.
Diesel, which powers Australia’s bulk transport trucks, has also spiked, with costs presumably to be passed on to households via rises in grocery store prices as supplies get more expensive to deliver.
Owners of electric vehicles are by no means immune, as the electricity that powers the grid, which recharges the vehicles, is heavily reliant upon the same diesel-powered supply system, not to mention the natural gas that is used to fire up power stations when demand surges.
The reason for the price hikes is that 20 percent of the world’s oil supply passes through the Strait of Hormuz, the narrow sea lane that connects the Persian Gulf and oil-exporters Saudi Arabia, Iraq, Kuwait, Qatar and UAE, to the rest of the world.
Hormuz is a natural choke point, measuring less than 40km at its narrowest point, between the southern coast of Iran and the northern tip of Oman.
The extended Iranian coastline means that even devoid of an active navy, Iran can attack the Strait at will, via drones and missile strikes, bringing global oil trade to its knees instantly.
The global air traffic hub of Dubai is only 100km away – leaving many Australian expatriates stranded as they attempt to fly home via that one key stopover, which is now in an active warzone.
According to Geoscience Australia, a Federal Government organisation, Australia is a net importer of oil, with only around 20 percent of the oil the country needs actually refined here last year.
“Australia is a minor oil producer, ranking 29th in the world and accounting for 0.5 percent of total oil production in 2020,” says Geoscience Australia data.
“Most of Australia’s oil is currently produced on the North West Shelf, some distance from domestic east coast refining capacity.”
Apparently, domestically produced grades of crude oil are generally not suited for Australian refineries, reinforcing the importation of internationally-sourced oil, hence nearly 80 percent of Australian-produced oil was exported in 2020.
Currently, Australia only has two active oil refineries: Ampol’s Lytton site near Brisbane, and Viva Energy’s refinery in Geelong.
The Kurnell refinery in Sydney ceased refining oil in 2012, and was converted into Australia’s largest fuel import terminal in 2014.
Recent legislation mandates that Australia maintain a Minimum Stockholding Obligation (MSO), which is measured in mega-litres, but is often expressed in an estimate of how long the current stockpile will last.
As per an MSO update on 6 March, Australia has roughly 40 days each of petroleum, diesel and jet fuel on hand, in case of a major supply chain emergency.
By Thomas O’KEEFE
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