Aussie petrol hits $2.20 a litre as sanctions on Russian oil is instated

Petrol prices have soared above 220c/L in Adelaide as the US officially announces a ban on Russian oil.

The price of petrol has hit new record highs well above $2 a litre in Adelaide as the US announces a ban on Russian oil.

US President Joe Biden this morning banned imports of Russian oil in a bid to de-escalate the country’s invasion in Ukraine by hitting one of its biggest economies.

Russian products account for less than 10 per cent of US oil and petroleum products.

It comes as petrol prices soar in Adelaide, with at least three outlets on Wednesday morning advertising prices at 221.9c/L including at Hackney, Mansfield Park and Stepney.

United at Henley Beach were also advertising high prices at 199.9c/L on Wednesday.

The top metro price in Melbourne according to the RACV was 205.9c.

Average prices are lower however, with savvy shoppers still able to buy unleaded petrol in the low 170c range.

The price surge has leapfrogged an anticipated price hike expected to come in the next couple of weeks as high oil prices flow through into the Australian market - a process which usually takes a few weeks.

Global oil prices began to surge again late last week on fears the US and Europe would slap sanctions on sales of oil from Russia, which is the world’s second-largest oil exporter.

The price of Brent Crude futures briefly hit $US139.13 per barrel on Monday, and with petrol prices rises lagging oil prices by a few weeks, Australian consumers should expect more pain at the pump soon, according to CommSec chief economist Craig James.

“Brent crude is now at $US128 a barrel so the Australian average pump price is on course to hit $2.10-$2.20 a litre over the next few weeks,’’ Mr James said.

“The national average petrol price lifted 10c a litre after a $US10 barrel increase in crude oil over December.

“There was a similar 10c lift in February to $1.80 a litre after Brent crude rose from $US79 a barrel to $US89 a barrel in January.’’

Be prepared for more pain at the pump in coming weeks.

Mr James said average petrol prices hit record highs in Melbourne (191.3c/l), Hobart (196.9c/), Darwin (189.7c/l) and Canberra (188.6c/l) in the first week of March, however in some cities the price went as high as 199.9c at the bowser.

The $2 barrier did not take long to be eclipsed however, with some retailers moving sharply higher on Tuesday.

US Secretary of State Antony Blinken said on the weekend that the US and its European allies were considering banning imports of Russian oil.

Russian Deputy Prime Minister Alexander Novak warned that any such strategy could have “catastrophic consequences’’.

“The surge in prices would be unpredictable. It would be $US300 per barrel if not more,’’ he reportedly told state television in Russia.

Mr James said hopes that the OPEC oil cartel would move to ease supply pressures were dashed last week, when the group indicated there would only be a modest increase to production quotas next month.

“The main factor that could provide a break on rising oil prices is a nuclear agreement between the US and Iran,’’ Mr James said.

“If that deal were to be consummated then Iran could add 1 million barrels per day of oil to global supply.’’

Coles Express petrol station in Adelaide’s Mansfield Park showing unleaded petrol at 221.9c/l on Tuesday, March 8. Picture: Dean Martin

Mr James said the average Australian family was now spending a record $257.46 per month on petrol, up $35 from the start of the year.

The surge in fuel prices is also expected to flow through into consumer goods, and therefore inflation.

AMP Capital chief economist Shane Oliver said the Russian conflict was also flowing through into higher wheat prices, and higher thermal coal prices.

“The rise in energy and food prices (with the oil price up 20 per cent since the invasion started, thermal coal prices up 60 per cent and wheat prices up 25 per cent) will add to inflation,’’ Dr Oliver said.

“In Australia, the rise in world oil prices will likely add another 15c-20c a litre to already record petrol prices. And higher wheat prices will push up bread prices.’’

Dr Oliver is predicting inflation will hit about 5 per cent by mid-year, compared to the Reserve Bank of Australia’s forecast of 3.75 per cent.

“As a result, we have brought forward our expectation for the first RBA rate hike to June,’’ he said.

“Our base case for the first rate hike had been for August with a high risk of June, but with March quarter inflation now likely to come in well above RBA expectations and the ongoing piling on of price rises only adding to upwards pressure on wages growth – which we expect to accelerate to a 0.8-0.9 per cent quarter on quarter rise in the March quarter - we now see the RBA concluding that the conditions for rate hikes will be met in June.’’

Originally published as Aussie petrol hits $2.20 a litre as sanctions on Russian oil is instated