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11 March, 2022

Fuel prices skyrocket due to conflict

By Drew McCallum, director of Inland Petroleum

By Supplied

Due to the unprecedented times that we currently live in, we are seeing the highest fuel prices in history. The main contributors causing this steep rise are:

1. Trade sanctions imposed by western countries against Russia; meaning Russia cannot export oil to these countries.

Russia is one of the largest oil-producing nations globally, so if they aren’t able to ship oil to any western countries, this will undoubtedly leave a massive hole in the supply of oil, causing shortages worldwide.

2. World demand for oil has recovered and grown compared to what demand was like pre- COVID.

The world economy had a very bullish sentiment, causing some of the most significant stock market gains in years until the Russian/Ukraine conflict. This bullish mar- ket has left an extremely high oil demand even though market confidence has been slightly hindered by the conflict.

3. A military conflict, the size, and seriousness of this one is a consider- able oil demand generator in itself.

These three main con- tributing factors have made the Brent Crude Oil price per barrel (most of Australia’s pricing is based on this crude), jump from around $68 a barrel last November to $139.13 on Monday, March 7, meaning nearly a 100 per cent rise over four months.

The steepest increase has been between last Thursday and now after Russia invaded Ukraine. That increase over nine days was around $33 per barrel as Brent hovered around $90 early last week.

Unfortunately, I think we are only seeing the beginning of what could be an ongoing trend for the foreseeable future. 

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