Is the global fuel crunch about to hit us? | ABC News Daily podcast

Added: 2026-05-25

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[00:00:49]The cost of fuel may have edged lower, but don't get comfortable because the real pain from the closure of the straight off her muz hasn't really hit us yet. Today, Saul Kaik, energy expert at MST Financial on how we've weathered the storm so far and what might come next. I'm Sam Hauling on Gatagle land in Sydney. This is ABC News Daily.

[00:01:24]So drivers may be forgiven for thinking that we are not in a fuel crisis right now because prices have come down and you know it seems like it's situation normal. Well, things do feel a little bit calmer right now, but unfortunately that's not a sign that we're out of the woods on this.

[00:01:48]So, if we perhaps just rewind to understand how where we've got to today quite quickly, we saw the government realize the scope of the risk here and they've implemented a number of policies. In particular, they've implemented two. So one is the kind of package to underwrite and support more fuel coming into Australia and secondly is their diplomatic efforts.

[00:02:12]>> Export finance Australia has been able to work with businesses to secure four additional cargos of diesel.

[00:02:22]>> Essential goods will continue to move between Australia and Singapore. Prime Minister Wong and I have just signed the joint statement that will protect our mutual energy security and a support the flow of fuels and LNG between our two countries.

[00:02:39]>> Anthony Albanesey's diplomatic blitz was rounded out today with the announcement of an extra 100 million L of diesel bound for Australia on top of other gains.

[00:02:49]>> We have sourced the fuel uh from Brunai and Korea as well. We're engaged with Indonesia. I had contact with Indonesia >> and in large part thanks to those government efforts, fuel has continued to arrive in Australia and has continued to arrive even in the last few weeks where the real kind of crunch point for global markets is uh starting and we should we actually are quite lucky. So if you look at some other parts of the world right now there are shortages in jet fuel and diesel in particularly there's places where flights have been curtailed and cancelled. There's places you can't get flights beyond a certain distance. There's been demand management measures. Some businesses and so on have had to shut down. So Australia, we while we're paying more at the bowser, we've certainly got through this so far relatively better off and unscathed compared to other parts of the world.

[00:03:44]>> Yeah. And I mean Chris Bowen, the energy minister, he actually says we have more fuel supply now than we did before the war, which seems extraordinary. And that's because I think now we've finally got some government focus on this. And the reason you're seeing that and the reason the stocks have have actually come up though is because the government does realize that there's still risk ahead of us here, right? So that's important. So if we look at where we are today >> as we go forward and remember the straight of is still largely closed >> and in fact one of the best informed experts in oil markets who's the CEO of ADNO made a comment recently highlighting that even if the war somehow ended tomorrow we're not going to see a normalization of oil markets until 2027 cuz it's going to take that long to get everything kind of back to normal again at best. And so this is not actually a time for complacency. This is a time to keep up all the efforts that the government has done to make sure that again while there's going to be a lot of impacts around the world, we mitigate those and minimize those compared to others.

[00:04:54]>> Okay. So we were paying up to like $220 for unlettered petrol a liter at 1.280 for diesel. Now that's come right off and people will notice that it's sitting at around 180 or so. It moves around of course for unlettered petrol, but are you saying that don't get too used to that motorist cuz it may not stay down there for too much longer?

[00:05:18]>> That's right. You know, oil prices are always going to move around. Even amidst a big crisis, you'll get wild girration.

[00:05:24]But the pressure is still very much on the market. So perhaps a a really good way to think about this is right now about 14% of the world's oil supply is basically not available.

[00:05:38]But that filters through into the market and that doesn't mean that we've seen a 14% drop in demand. So actually we've only seen a 4% drop in demand and the other 10% is us drawing oil out of storage. So we've seen record releases of strategic petroleum reserves in the US, Japan and around the world plus commercial reserves. Now what happens is as the straight remains closed, we slowly run out of all of those stocks.

[00:06:10]>> Mhm. And then that 4% of no demand drop has to essentially triple in size closer to the 14%. And that is when you start to feel much higher prices and potential shortages and potential rationing around the world. And I think you know if the straight remains closed for a few more months, it's going to be very hard for Australia to completely escape some form of stricter demand management.

[00:06:37]>> Okay. So, we're sort of weathering the storm, if you like, for now. And the government has done, as you say, a pretty good job of shoring up fuel supply from nations like Singapore. It also did a deal, didn't it, with China on jet fuel. What What's that all looking like in terms of fuel for planes? And as a nation of travelers, we always want to know the answer to that question.

[00:07:00]>> That's right. And so as we discussed last time, the most important thing the government could do here are these diplomatic efforts right at the prime ministerial level right at the top which have been done with Japan, Malaysia, Korea, Singapore and more recently China where you know moving past the headlines what's basically gone on behind the scenes is Australia's recognized we're actually really vulnerable for fuel imports but we've got one really good point of leverage which is we're really big exporter of liqufied natural gas and right now there's a big shortage of liqufied natural gas also because all of that all the LG stopped coming through the straight of Hammuz and all the countries that we import fuel from we export our liqufied natural gas to and so there's basically been an understanding there which says we'll keep sending you our LNG as long as you keep sending us our fuel and that way we keep the fuel coming to Australia and that actually explains for example why the big push to tax, for example, Australia's gas exports was shut down by our prime minister because actually he's had to agree behind the scenes with our trading partners not to do that in return for them not restricting fuel coming to Australia.

[00:08:21]WSO even though it might seem that everything is under control as you say the straight of Hermuz remains closed.

[00:08:29]Now last time we spoke you said that if the straight remained closed we would reach a crunch point maybe in miday. Now obviously that's been pushed out but tell me now when does this crunch point come if the straight remains as it is?

[00:08:45]>> Well I think the starting point there is the crunch point at a global level is now here.

[00:08:49]>> Mhm. The head of the International Energy Agency says he's concerned the ongoing fuel crisis caused by the Iran war could lead oil prices to enter what he calls the red zone in coming months.

[00:09:02]Fatty Bir says with the northern hemisphere summer approaching, the demand for oil is about to skyrocket.

[00:09:09]>> The problem is end of June, early July, the travel season starts. What does it mean? Typically oil demand, oil consumption goes up.

[00:09:19]Now the reason it becomes riskier for Australia here is as this puts more pressure on a lot of countries around the world that's going to create potential economic problems, social unrest and therefore political pressure for a lot of nations around the world to start calling up our trading partners and say actually can you divert some of that fuel you're supposed to send Australia and send it to us instead. And that's why all of the efforts that the government has taken to keep fuel arriving in Australia, they need to keep that up.

[00:09:54]>> And of course, the cost of oil so it has been moving around a lot, but it's been as high as, you know, 100 more than $100 a barrel. And of course, before the war, it was trading at $65 a barrel, just to put that in people's minds. But the federal budget this month, it had one scenario, one outlook that the price could climb to $200 a barrel. I mean, could we actually reach that point? Do you think that would be a total game changer, wouldn't it? Well, look, those when we enter the more doomsday scenarios of what could play out here, which in particular includes essentially the straight not opening for months or a war resuming and a lot of energy infrastructure being damaged on a permanent basis, which means even once the war ends, you don't get the supply coming back online for years, then you can see oil get towards $200 a barrel. Although, I would caution that ultimately oil can't stay at $200 a barrel for too long. It can kind of spike up there. I think the more the kind of more realistic risk is can we get oil at $130 to $150 a barrel which forces essentially the demand out of the market right so you know one way is we can have rationing the other ways you make prices so high that people can't afford it anymore either way it's the similar kind of you know bad outcome for everyone so why prices can spike to 200 I don't think they can stay there but the reason they can't stay there is because you trigger basically a global economic recession which curtails econom eomic activity and therefore oil demand and balances the market. So those kind of scenarios are there to plan for because it's going to have a much bigger economic impact than you know what we're going to feel when we have to fill up our car each week.

[00:11:36]>> Well, okay. And as you say, you know, there are many nations in a lot of trouble already around the world that are already rationing. you know, Sri Lanka, Bangladesh, the Philippines, the UK, it is now having to backtrack on a plan to ban imports of diesel and jet fuel made from Russian oil in third countries. So, abandoning sanctions if you like. So, it is getting tough even in big developed countries as well at this point.

[00:12:05]>> Oh, that's right. I had to travel for business to Italy last month and there were restrictions on flights and particularly if you had um short flights. They weren't available unless the plane was bringing the fuel in with them because they couldn't actually fill up the planes in some of the airports in Italy. And so this isn't just some of the more emerging economies which have, you know, much more difficult economic ability to pay. It is starting to filter into, you know, parts of Europe. And again, the scale of the demand impact here can still rise twofold above what it's been to date. It's very hard to see how even countries like the US and Australia, which are relatively better positioned in our ability to pay and have leverage in our other exports, but for us to get through that completely immune, I think is going to be really tough.

[00:13:05]All right. So, so we are for now managing to withstand I guess this fuel crisis, but the worst might be yet to come. How much longer can we actually sustain the straight of Hermuz being closed? Well, I don't think there's necessarily much time left. And if I look at, you know, some of the modeling that we do if this goes on for say another 3 months, it becomes a real struggle in my view to see how we don't have demand destructions at levels historically which have implied global recessions. My concern is, you know, there's going to be an element of economic impact here which is already inevitable and built in and hopefully it's not going to push us to recession levels, but the longer this goes on, the more we end up in that territory.

[00:14:02]>> Gosh. Okay. So then, so what do you think as motorists? What can we be doing now? What should we be doing? What should be in our minds?

[00:14:10]>> Well, again, we're all in this together.

[00:14:11]There are different parts of our economy who need fuel more than others. I think, you know, we're not in a world where we need to panic. The fuel has still been arriving in Australia. But to the extent that we can be conscious of what we're using and not use more than we need to, there's limits to what we can do as individuals. But to the extent we can conserve more can only be a good thing.

[00:14:32]And I think it's just important that because things can feel a little bit calmer now that we don't get complacent as the public. We don't allow our politicians to get complacent about this issue. It hasn't actually gone away.

[00:14:43]This is still the doomsday scenario for oil markets which has been war games since the 1970s playing out in front of us. We must be vigilant and remain being vigilant until we are clearly on the path out of this because right now there is still no light at the end of that tunnel.

[00:15:04]Soul Cavanick is an energy expert at MST Financial.

[00:15:09]This episode was produced by Sydney Ped.

[00:15:12]Audio production by Sam Dunn. Our supervising producer is David Cody. I'm Sam Holing. ABC News Daily. We'll be back again tomorrow. Thanks for listening.