Rising tensions in the Middle East could soon have an impact on fuel prices in Fiji, as economists warn that any sustained disruption to global oil supply may lead to increased costs at the pump. Neelesh Gounder, a senior lecturer in economics at the University of the South Pacific (USP), emphasized that instability around critical shipping routes is already producing uncertainty within global energy markets.
The Strait of Hormuz plays a vital role in transporting crude oil, and recent military actions involving the US and Israel’s attacks on Iran and Iran’s subsequent retaliation have placed this route under threat. Gounder noted that this escalating conflict is influencing shipping premiums and causing vessels to reroute, which adds to market unease.
“If there is a supply shock caused by a decline in oil and gas production from countries like Saudi Arabia, the UAE, and Qatar, it could place upward pressure on crude oil prices and consequently on fuel prices,” Gounder explained. He pointed out that global data is already reflecting upward pressure on crude prices, primarily driven by market concerns and speculation surrounding the ongoing conflict.
Gounder further clarified that the bulk of expenses for Fijians at the fuel pump is correlated with the price of refined petrol bought through Singapore, utilizing the Means of Platts Singapore benchmark. Notably, most of Singapore’s oil supply for its refineries originates from the UAE, Qatar, Saudi Arabia, and Kuwait.
In addition to crude oil prices, factors such as freight and exchange rates also play crucial roles in determining the costs consumers face at the pump. However, Gounder’s analysis of industry metrics indicates that the refined fuel markets are bracing for potential price spikes should the conflict continue.
The evolving situation serves as a reminder of the interconnectedness of global energy markets and local economies, underscoring the need for careful monitoring of geopolitical developments. Despite the daunting forecasts, maintaining awareness and preparedness can help mitigate the impact on consumers in Fiji, fostering resilience in a fluctuating global landscape.