Middle East unrest to push fuel to $1.50 a litre
Sydney Morning Herald
Thursday February 24, 2011
THE turmoil in the Middle East could spill over into household budgets, costing families an extra $360 a year as the price of oil surges.Economists expect petrol to hit $1.50 a litre in the next two weeks, adding further strain to households already suffering from higher utility bills and food prices.The push for democracy that has ousted leaders in Egypt and Tunisia, and has nudged oil-rich Libya to the brink of a civil war will also hurt Australian retailers as families tighten their belts.A Commonwealth Bank senior economist, Michael Workman, said a 15 rise at the petrol pump had the same effect as the Reserve Bank lifting interest rates by 25 basis points.If petrol jumped to $1.50 a litre, families can expect to pay an extra $30 a month or $1 a day, he said."But generally higher oil prices go hand in hand with higher energy prices which is a big positive for Australia, which is a major energy exporter," Mr Workman said."However, that is a hard argument to win when household budgets are under pressure."The Macquarie Bank chief economist, Richard Gibbs, said families would not get any reprieve until next year at the earliest. He said household budgets would continue to be tightened in coming months, while a fall in the dollar against the US dollar could send petrol to $1.60 a litre."People's discretionary spending is going to be much, much tighter," he said. "The prospects for recovery in retailing over 2011 are looking slimmer and slimmer as we move forward with this latest upheaval."Mr Gibbs said the situation would worsen if the violence spilled into Saudi Arabia, the world's largest oil exporter. It has the seeds for a revolt with high food prices and chronic youth unemployment."Saudi Arabia really worries me because I saw first hand in 2002 what they did in relation to taking out alleged al-Qaeda cells - it was absolutely brutal," Mr Gibbs said."If that was to fall or significantly be destabilised internally, well then it is a concern in terms of a longer-term deterioration in the supply of oil."Markets have become more nervous as protests escalate in other Arab countries.In the past week West Texas Intermediate crude surged 11.4 per cent to $US93.57 a barrel, a two-year high. It triggered a sharp fall on Wall Street on Tuesday night.
© 2011 Sydney Morning Herald