Treasury modelling suggests a sustained 10 per cent increase in the oil price over a year would add about 0.4 of a percentage point to the inflation rate.
For more than a year, there’s been a nagging worry hanging over the Australian economy as it battles to tame inflation: what if the fighting in the Middle East turns into a bigger war, one that disrupts the flow of oil and drives up the prices we pay for petrol?
“The issue in the Middle East is that these conflicts have been going on as long as I can remember, but you only have a flow-on to the oil price if oil production and supply is disrupted,” says Shane Oliver, the chief economist at AMP. “We are seeing a spike in oil prices, and that has consequences for motorists and families and communities here in Australia and right around the world,” Treasurer Jim Chalmers says.
“We want to make sure that the global price is appropriately reflected in the price that people pay at the bowser,” he says.Crude oil and taxes are the biggest determining factors in the retail price of petrol, accounting for about 83 per cent of regular unleaded and diesel, according to the National Roads and Motorists Association . Other costs include refining, wharfage, shipping, insurance, and the profit margins for retailers and wholesalers.
Australian fuel prices go through cycles of varying durations, during which retailers progressively discount their fuel by a few cents each day to compete for market share until prices bottom out, then spike again by as much as 25¢ to 40¢ a litre.Motorists in Sydney, Melbourne and Brisbane are subjected to the longest fuel-price cycles, which now run for up to seven weeks on average, nearly double what they were six years ago, Khoury says.
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