Factors affecting petrol price

www.abc.net.au 24/2/2003 Steve Marshall

EMMA ALBERICI: There are growing fears that surging petrol costs will stifle the Australian economy as international oil prices continue to hit new highs. Concerns over Iraq pushed the price of crude to US$37 a barrel last week, for the first time in 2.5 years. However, industry experts say it's not just the high chance of conflict in the Middle East that's driving up the oil price. Steve Marshall explains. STEVE MARSHALL: For a man who analyses oil markets day in day out, Simon Klimt isn't panicking just yet, despite the looming conflict in Iraq. SIMON KLIMT, HEAD OF COMMODITIES, WESTPAC: No panic stations yet. We're still looking at a scenario very similar to what happened in '91. STEVE MARSHALL: The Gulf War 12 years ago shot oil to US$41 a barrel. But it was a brief war matching analysts expectations, meaning the price spike was short-lived. SIMON KLIMT: It's really only the length of time it spends at high prices that causes a problem. If we go up there for short periods of time, it really shouldn't cause too many problems for the economy. STEVE MARSHALL: Even oil companies here are optimistic. JOHN ELLICE-FLINT, MANAGING DIRECTOR, SANTOS: I think that there is always overreaction on the oil price but I think what you'll see is it coming back to the 20s, mid 20s. STEVE MARSHALL: Given the media and political focus on the link between possible conflict in Iraq and the price of oil, you'd be forgiven for thinking Iraq was the only oil supplier. But analysts point out there are several other factors affecting price. SIMON KLIMT: You've got very cold weather in the Northern Hemisphere, which is really using up a lot of oil for heating -- heating oil demand. You've got Venezuela, which produces three million barrels a day, that's been struck by a strike for quite a long period of time. And you've got Nigeria, which has just started a strike, which has about as much oil as Iraq -- about 2.5 million barrels a day -- that is currently threatened to stop coming onto the international market. So those are the real factors that are affecting the price at the moment. STEVE MARSHALL: Which ultimately affects the price we pay for petrol. And if wasn't for the strong Australian dollar, we'd be paying a lot more. The strength of the currency is actually helping keep some of the oil price pressure off the retail price at the bowser. Steve Marshall, Business Breakfast.

Please note: Transcripts on this website are created by an independent transcription service. The ABC does not warrant the accuracy of the transcripts. MULTIMEDIA: Hear the audio: War is only one factor affecting petrol prices