Petrol’s not $5 a litre yet, so have we dodged a bullet? – The Economy of Everything

We were told to expect fuel prices at $4 or $5 a litre and the cost of a barrel of oil to skyrocket to US$200 ($340).

But three months on from the start of the Middle East conflict, markets seem to be coping with the virtual closure of the Strait of Hormuz.

This week, Brent crude was trading about US$109 per barrel, and unleaded 91 was selling for an average of $3.29/L, according to price-tracking site Gaspy.

Diesel is back down below petrol and there’s no sign of a fuel shortage – at least for now.

So have we dodged a bullet?

In The Economy of Everything podcast this week Tamsyn Parker and Liam Dann take a look at why fuel prices haven’t gone through the roof and whether the worst is still to come.

“One argument is that they were just wrong. But it does seem a few things have happened that have meant those apocalyptic scenarios haven’t played out,” Dann says.

“To my way of thinking, it is a bit of vindication of markets. Markets are quite good at sorting these things out.”

Co-host Parker says: “I feel like in a crisis, any kind of crisis – we’ve been through a few, Covid, the Global Financial Crisis – things adjust. People adjust.

“I mean, that is one thing about humans, we’re quite adaptable.”

While the strait remains largely shut, about 50 ships a week are getting through.

Countries are also using alternative routes to get oil and gas out through the Red Sea.

That has helped with about 5% of what would have otherwise gone through the strait.

Countries have also been tapping into large oil reserves, but this week the International Energy Agency warned those reserves are starting to dwindle.

Listen to the full episode to hear more about:

• Higher costs still to hit food prices
• Why the Reserve Bank will get the Official Cash Rate call wrong
• The service sector’s 29 months of shrinking employment
• And why the public sector cuts are more about saving money than AI

The Economy of Everything is available on the iHeart app or wherever you get your podcasts.

The series is hosted by Liam Dann, business editor-at-large and Tamsyn Parker, business editor for the NZ Herald. Thanks to CMC Markets.