Share this @internewscast.com
Westpac Bank has projected a significant uptick in oil prices, potentially reaching $110 per barrel, though the average is expected to balance out at $90 between April and June. This surge is anticipated to trigger a ripple effect, influencing Australian motorists at the pump and slightly denting economic growth by 0.1 percentage points.
Sian Fenner, the head of business and industry economics at Westpac, highlighted that the increase in petrol and diesel costs is likely to surpass the direct correlation with crude oil prices. “We foresee retail petrol and diesel prices averaging approximately $2.02 per litre and $2.50 per litre, respectively,” she explained.
Adding to the economic strain, the cost of essential goods like fertilizers, such as urea, has seen a sharp rise. The aviation industry is also feeling the pinch, with several airlines already implementing fare hikes as a response to escalating jet fuel prices.
Fenner also warned of the substantial risk of a more prolonged and severe disruption. Westpac’s contingency planning now contemplates the conflict extending for three months, a scenario that could lead to even more severe economic consequences.
“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.”
NEVER MISS A STORY: Get your breaking news and exclusive stories first by following us across all platforms.
The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.
