Oil's shipping costs add to Australia's interest-rate dilemma
Carrington Clarke explains how costly fuel can spread inflation beyond the gas pump ahead of the Reserve Bank's November decision.
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The intersection of high oil prices, wages and interest rates | ABC NEWS
Things we can learn from the video
Press to jump
- 0:10Clarke links rising crude prices to the risk of renewed conflict involving the US, Israel and Iran.
- 1:00Shipping difficulties in the Strait of Hormuz and Red Sea add insurance and transport costs.
- 2:23Higher fuel prices hit motorists directly and can spread inflation into other household expenses.
- 3:42Persistent inflation expectations leave a potential Australian interest-rate increase open at the next Reserve Bank meeting.
- 4:13Clarke identifies similar energy-driven inflation pressures abroad, particularly in Europe.
More expensive oil is only part of the problem: getting it through threatened shipping routes adds insurance and transport costs that can reach Australian households well beyond their fuel bills.
That is the chain Carrington Clarke traces in a report from Australia's public broadcaster, the Australian Broadcasting Corporation (ABC News). Brent crude has climbed above US$116 a barrel, the report says, approaching levels seen at the start of the Iran conflict.
Clarke attributes the pressure to the risk of renewed fighting involving the United States, Israel and Iran, alongside escalating conflict between the Houthis and Saudi Arabia. Footage of ships accompanies his explanation of logistical difficulties and higher costs in the Strait of Hormuz and the Red Sea.
For Australians, the immediate effect is more expensive fuel at the pump. But Clarke also describes second- and third-round inflation effects: rising fuel costs can feed into other prices rather than remain confined to motorists' spending.
That leaves the Reserve Bank of Australia, the country's central bank, facing a difficult decision on November 3. Clarke says persistent inflation expectations make another interest-rate increase a live possibility, not a settled outcome. The segment does not announce a rate decision.
The same tension extends overseas. In the closing discussion, Clarke points particularly to Europe, where energy costs are also driving inflation and raising the prospect of higher interest rates. His warning is that the oil shock threatens both household budgets and the wider global economy.
An Iran-backed Shia Islamist political and paramilitary group from Yemen. It has been a major participant in Yemen's civil war.
More on Wikipedia ›Australia's central bank, which also issues the country's banknotes. It took over central banking responsibilities from the Commonwealth Bank in 1960.
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What does RBA stand for in Australia's interest-rate debate?
The Reserve Bank of Australia is the country's central bank.