OPEC oil cuts: Price rise to hurt Australian farm budgets

Vladimir Putin and the leaders of other oil-producing nations are set to squeeze on-farm profitability in Australia.

Fuel prices are set to skyrocket following a decision overnight by the world’s oil production cartel to cut output by two million barrels a day.

The Organisation of the Petroleum Exporting Countries and its allies, including Russia, agreed on severe production cuts in a bid to drive up prices.

The move by OPEC — which includes major oil producing nations such as Iran, Congo, Iraq, Kuwait, Saudi Arabia — is the biggest cut since 2020 and will encourage central banks to hike interest rates.

Australian Dairy Farmers president Rick Gladigau said the OPEC decision comes as primary producers were enjoying relatively low prices at the bowser.

“Rising petrol and diesel prices ultimately eat into the margins of not just dairy farmers, but all types of farming operations,” he said.

“That cost is either worn by the farmer or has to flow onto the consumer.”

Mr Gladigau said a common frustration for regional motorists was the inexplicable disparity between petrol and diesel prices.

“For instance, in Adelaide at the moment, we’re paying $1.86 for unleaded and $2.10 for diesel,” he said.

“There’s been times when the gap is even wider. With the end of the federal government excise (cut of 22 cents a litre), unfortunately, petrol companies have an opportunity to raise prices further.”

Russian President Vladimir Putin. Picture: Ilya Pitalev

When Russia invaded Ukraine in February, oil prices shot up to record highs, prompting the Morrison Government to introduce a cut to federal excise of 22 cents a litre.

The incoming Albanese Government kept in place the sunset date for the excise holiday, which ended last week.

RACV communications head Eleanor Colonico said the trend for fuel prices over the coming days and weeks was difficult to predict.

She said international benchmark prices and the reintroduction of the national fuel excise would influence prices at the bowser.

“(Also influencing petrol prices are) the value of the Australian dollar relative to the US dollar and levels of competition in different areas,” Ms Colonico said.