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Should these predictions come to fruition, Westpac anticipates oil prices soaring to $110 per barrel, though they are expected to average around $90 from April to June. This scenario could significantly impact Australian drivers, with a slight 0.1 percentage point dip in economic growth.
“Motorists should brace for more than just a direct transfer of rising crude oil costs to petrol and diesel prices,” explained Sian Fenner, Westpac’s head of business and industry economics.
Consequently, Fenner predicts that retail petrol prices will hover around $2.02 per litre, while diesel might reach $2.50 per litre. Additionally, the price of fertilizers like urea has surged, and some airlines have already adjusted fares due to increased jet fuel costs.
Fenner also cautioned about the “material risk of a more extensive and prolonged disruption,” with Westpac’s alternative scenario now suggesting the conflict could extend for three months.
“Fertiliser prices such as urea are also up sharply and some airlines have already announced price increases due to the rise in jet fuel.”
Fenner said there “remains a material risk of a more extensive and prolonged disruption”, and Westpac’s alternative scenario now has the conflict lasting three months.
In such a case, the economic impact would be far worse.
Oil prices would average $US130 a barrel in the second quarter of the year, and at their peak would hit $US200.
Underlying inflation would also remain above the Reserve Bank’s target until well into 2027, and half a percentage point would be lopped off Australia’s overall economic growth.
In a sobering end to her research note, Fenner said the turmoil could be even worse if energy infrastructure suffers permanent damage.
“This (alternative) scenario assumes no significant damage to oil and LNG production and freight facilities,” she wrote.
“A permanent loss of supply would prolong the cost to the real economy.Â
“It would also add to the risk of a sell-off in financial markets that would not only amplify the negative shock to the global economy but complicate the policy response.”
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