Q: What happens if the Strait of Hormuz remains closed for months?
A: University of Sydney Associate Professor of Economics David Ubilava called the scenario “unlikely”, but said disruption would “become a norm”.
Ubilava said adjustments would “prolong the fall-out of the shock”.
He explained a “rocks-and-feathers” dynamic, where prices increase quickly (such as what we’ve seen with fuel), but decrease slowly.
“Markets are slow to re-adjust once the root cause of the shock is removed,” Ubilava said.
Q: Will we run out of fuel?
A: Associate Professor Ubilava said: “No.” On Sunday, Energy Minister Chris Bowen said Australia had 38 days of petrol, and 30 days of diesel and jet fuel.
Q: When will prices go down?
A: University of Sydney Associate Professor of American Politics and Foreign Policy David Smith believes “backlogs” and “unblock[ing] supply chains” will delay prices going down.
He said: “When you shut down any big element of infrastructure... it takes a lot longer to start it up again.”
“The big fear is that the longer this goes on... getting everything back to normal will take even longer.”
“There is even the possibility that things could get permanently more expensive,” Smith added.
Q: Will people buy more electric vehicles (EVs)?
A: It is difficult to say this early on if EV sales have increased since the conflict began on 28 February. Most of this data is released monthly, and it is still March.
However, looking at Google Trends, Australian searches for EVs have increased since 1 March.
Q: How are other countries dealing with this issue?
A: In South East Asia, some countries have issued work-from-home orders, and instructed government agencies to reduce their energy and fuel consumption.
New Zealand has announced $NZ50 ($AU41) weekly payments to 143,000 lower-income families with children for one year, or until fuel prices decrease.
In Ireland, the Government will reduce a tax on fuel and increasediesel rebates for businesses.
This brings us to the next question →
Q: Can the Government lower petrol prices?
A: Most countries have a fuel excise – a tax paid by consumers on fuel for transportation. In Australia, the rate is 52.6 cents per litre.
Some state MPs in NSW, Victoria and Tasmania have asked the Government to cut the fuel excise.
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On 13 March, Energy Minister Chris Bowen said a reduction was “not on our agenda”.
Last week, International Energy Agency (IEA) Head Fatih Birol said he would be “very careful to implement sudden, abrupt changes to the tax regimes.”
Q: Can I still go on my Euro summer trip?
A: According to Associate Professor Ubilava, prices will probably be high for a little while. To avoiddisruptions, some airlines are finding alternative routes.
These alternatives may be longer, “so the planes simply need more fuel than usual,” making them more expensive.
“[The] fuel price surge that will stick around for a bit longer even after the conflict ends (and until markets settle),” Ubilava said.
He added that it’s not all bad news, as post-conflict, airlines may have some “aggressive marketing strategies”.
Q: Why is petrol cheaper in some areas but costs more in others?
A: Associate Professor Ubilava saidthis is a regular feature of the market.
He said: “Substantial price differences across locations [were] probably more common before the disruption. Currently we see more of a blanket increase in prices.”
The NRMA said supply issues impacting regional areas specifically may be attributable to panic buying, as well as reports distribution terminals are not selling fuel fairly to independent operators.
Q: Should we be more worried about accessibility or affordability?
A: Associate Professor Ubilava believes accessibility would be more worrying if it became an issue, as itwould mean “people are willing to pay the price, however high the price may be, but there is no fuel.”
He used agriculture as an example, as farmers may take on increased costs “to make sure they can remain operational,” but if there is no fuel to access there is “nothing they can do.”
Across the board, Ubilava said the impacts of accessibility would be more noticeable, including in the supermarket.
Q: How serious is it? Is it like when we all hoarded toilet paper during Covid?
A: Associate Professor Smith called the comparison “really interesting”.
“Unlike in COVID, there aren’t a lot of measures that we can all take to do something about it (remember social distancing, hand-washing, vaccination), although we may be headed for a return to remote working,” he said.
Smith added: “There’s not a lot we can actually do, as ordinary citizens, except wait for the conflict to resolve.”
Q: I’m planning a Vic-NSW road trip to see family. Will there be fuel??
A: Assuming you take the Hume Highway, there will be plenty of petrol stations along the way.
Multiple servos at stops includingAlbury-Wodonga, Yass, and Goulburn are stocked, so you should be absolutely fine to visit family.
Check out the NSW Government’s Fuel Check app and Servo Saver in the Service Victoria app* for peace of mind en route.
*Every state/territory has their own version or recommends third-party apps.
