Fuel price on the move

30dec02

AUSTRALIAN motorists could be paying up to $1.05 per litre for petrol next month because of an oil industry strike in Venezuela and fears of war in Iraq, local industry sources said today. The chief executive of the Service Station Association, Ron Bowden, said petrol prices were likely to go as high as $1.05 per litre by mid-January.

He said it would also shift the mid-point in the cycle of price rises and falls from 92 cents a litre to the "high nineties".

The effects of a month-long strike in Venezuela, the third largest producer of the Organisation of Petroleum Exporting Countries, and the major supplier of the North American crude oil market, had already pushed local bowser prices up higher, Mr Bowden said.

The physical effects of the strike were compounded by market fears of war in Iraq and increased demand for crude oil in Europe and the United States during the Northern Hemisphere winter.

"The supply and demand balance has taken a hit on the supply side," Mr Bowden said.

"We are on the other side of the world but we're not immune. We are going through this oil company-imposed price cycle – that goes through a 10 to 12 cent movement."

Events abroad appear to have shifted the underlying median of the price cycle towards the high 90 cent range, Mr Bowden said.

"The oil price has already moved up five cents a litre and there is another four or five cents to go over the next couple of weeks," he said.

"We will probably see it peak at about $1.04 or $1.05.

"The median point (of the price cycle) is probably going to reach the high 90s."

The Australian newspaper reported earlier today that diesel prices were also on the rise, compounding losses suffered by the agricultural sector as a result of prolonged drought.

"Whenever there's the threat of war, diesel will go through the roof," the managing director of the HEH Australian Petroleum Consultancy Company, Kevin Hughes, told the paper.

Overnight, the US administration raised the stakes in its preparations for war in Iraq when it ordered two more aircraft carrier groups and a hospital ship to prepare for deployment to the Gulf in 96 hours.

Venezuela's 26-day-old strike continues to unnerve global markets.

During trading in London on Friday, the benchmark price of Brent North Sea crude oil scheduled to be delivered in February rose to US$30.10 dollars a barrel from the US$29.61 dollars closing price posted on Tuesday.

Venezuelan President Hugo Chavez is facing concerted opposition at home from the business sector and trade unionists, prompting US Ambassador Charles Shapiro to warn that the risk of violence – and hence further destabilisation of oil production – was mounting.