‘Clear and present danger’: fuel prices could rise by 30c a litre across Australia under IMF scenario
Summary
The International Monetary Fund (IMF) says that if global oil prices rise to US$130 a barrel due to ongoing conflicts in the Middle East, petrol prices in Australia could increase by 30 cents per litre. This rise could lead to higher inflation and pressure the Reserve Bank of Australia (RBA) to raise interest rates.Key Facts
- The IMF modeled a scenario where a Middle East conflict keeps key shipping routes closed and damages oil infrastructure, pushing oil prices to US$130 a barrel by late 2026.
- Australia's petrol price could rise by about 30 cents per litre if oil prices increase by US$30 a barrel.
- Petrol prices on Australia’s east coast recently rose above $2.40 per litre, near six-month highs.
- Economists expect that higher fuel prices would add over 1 percentage point to inflation by the end of the year, increasing living costs.
- The RBA raised interest rates four times recently and is watching how rising fuel costs impact inflation.
- The RBA’s current inflation forecast assumes a drop in oil prices to about US$81 a barrel by year-end.
- If oil reaches US$130 as per the IMF scenario, inflation might stay as high as 4.5% in late 2026 instead of falling as expected.
- Some economists think the RBA may focus more on local economic issues than global oil prices when deciding on interest rates.
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