Nations will release an extra 400 million barrels of oil to the market. All we need to do now is not panic at the pump |
Despite being one of the world’s top exporters of fossil fuels (coal and gas), Australia has little left of its own oil. Neither does New Zealand.
Both Australia and New Zealand sit at the end of a long supply chain for their transport fuels. The US-Israel war on Iran has led to this supply chain being squeezed. Iran’s move to shut down the crucial Strait of Hormuz has effectively frozen 20% of the world’s oil trade. Three ships were hit by projectiles in the strait yesterday.
When supply reduces, we expect prices to rise. That’s why petrol and diesel prices have shot up. Farmers and trucking companies are worried about possible fuel shortages, especially for diesel.
Many people will wonder why governments aren’t acting. But they are not sitting idly by. Australia and New Zealand are among the 32 member nations in the International Energy Agency (IEA) that have agreed to release reserves of oil to tackle price spikes, though it’s unclear how much this will help.
New Zealand’s fuel reserves could last perhaps four weeks if all new supply was completely cut off, while Australia has a little more after recent expansion of fuel reserves.
It’s important not to panic. Losing 20% of oil supply affects prices. But the other 80% of oil is unaffected by the war. Current price spikes are likely to be more affected by panic........