Oil is flowing again. So why is petrol still expensive?

• Gulf oil exports are back to 70 to 90 per cent of pre-conflict levels, but tanker rates from the Gulf to China are about 15 times higher, Westpac economists said.
• Headline inflation is tipped to rise 1.3 per cent in the December quarter as fuel prices jump about 15 per cent.
• The economists expect one final Reserve Bank rate hike in November and warn that escalation could send oil to $US150 a barrel.

Australian bowser prices are set to rise further, even as Middle East oil starts flowing again, with fuel tipped to jump about 15 per cent over the next three months.

In a video briefing with Senior Economist Justin Smirk, Westpac Head of Industry Economics Sian Fenner said delays in getting oil to market, rather than falling exports, were keeping crude above $US100 a barrel.

“The jump back up in oil prices to over $US100 comes despite the fact that we have actually seen Middle East oil exports increase,” Fenner said on Friday.

Houthi attacks in Saudi Arabia and strikes on Gulf tankers sent Brent crude to $US112 a barrel on Thursday, a level last seen on 18 May.

Meanwhile, Gulf exports had recovered to about 70 to 90 per cent of pre-conflict levels, Fenner said, but only 1 to 4 per cent of normal volumes were officially passing through the Strait of Hormuz, as exporters relied on “ships going dark” and ship-to-ship transfers.

Those workarounds have slowed deliveries at a time of fewer available tankers and depleted global inventories, she noted.

“The tanker rate from Gulf to China is about 15 times higher than it was beforehand,” she said.

If exports are rising, why is petrol so expensive?

Smirk noted that petrol is sitting at about $2.40 a litre and diesel at about $2.80 after the federal fuel excise discount ended in early August.

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The price of petrol is pushing inflation higher days before the official September quarter figures are released next Wednesday, and the Reserve Bank of Australia (RBA) announces its next decision on November 3.

Dated Brent, the price paid for physical cargoes of crude due for near-term delivery, was trading at about $US136 a barrel, well above futures prices, and this is the price that matters most for petrol and diesel, Fenner said.

Smirk said refinery disruptions, Chinese curbs on fuel exports, Ukrainian strikes on Russian refineries and strong demand for diesel had worsened the squeeze, with crude delivered into Singapore up 40 to 50 per cent while diesel prices had “doubled.”

In the briefing, Smirk noted Westpac expects September’s monthly consumer price index (CPI) to rise 0.6 per cent, lifting annual inflation from 4.0 to 4.1 per cent.

He said the trimmed mean, the RBA’s preferred measure of underlying inflation, was tracking at about 3.6 per cent a year, “well above the RBA’s target band.”

For the September quarter, Smirk said Westpac was holding its forecasts of a 1.3 per cent rise in headline inflation and a 0.9 per cent rise in the trimmed mean.