The impact of higher petrol prices was likely to flow through to consumer staples like fresh food, which have high transport costs. Taxi services were also likely to climb.
CommSec said a $1 rise in the barrel of oil leads to a 1 cent rise in the cost of petrol at the pump and the price has been rising for several months.
In January the Brent crude price was $US89 a barrel and it was now at $US128 a barrel (it traded as high as $US138 in Asia) after it spiked followed threats by the US to impose an embargo on Russian oil, which would tighten supply.
“The average Australian family is spending a record $257 a month on petrol, up $35 from the beginning of 2022. This is effectively dead money or a tax on consumption, meaning that consumers have to either cut back on non-essential spending or dip into savings,” CommSec said.
“The main factor that could provide a break on rising prices is a nuclear agreement between the US and Iran. If that deal were consummated then Iran could add 1 million barrels of oil a day to global supply.”
Other oil rich countries were unlikely to be able to make up the difference.
“Those that can, namely Saudi Arabia and the UAE, are well and truly in the box seat though and I expect the phones to be ringing in Riyadh and Abu Dubai today, with President Biden wanting a chat,” OANDA analyst Jeffrey Hayley said.
“Today’s price action will probably be another temporary death-knell for the “energy transition” in the short to medium term, although in the long-term, it will speed it up.
“The uncomfortable truth is resilience in supply chains has taken the front seat over saving the planet, and I am expecting nuclear, coal, shale and gas to get a new lease of life as the price of bringing Russia to heel and isolating them.
“I suspect growth projections for 2022 around the world will need to be sharply revised lower, and it will be interesting to see what the central banks of the world will do. I believe Europe and Asia will halt thoughts of monetary policy normalisation, and with Europe on the front lines, I can’t blame them.”
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