Fuel crisis: Chalmers says high petrol prices could stick around for three years

State and territory leaders will hold emergency talks on the fuel crisis as the Treasurer warns motorists could be stuck with soaring petrol prices for another three years because of the Middle East conflict.

In a speech in Melbourne on Thursday, Jim Chalmers is expected to outline how his Treasury Department has been constantly monitoring and modelling potential impacts of the war.

“We have been considering two scenarios, with a third more drastic one also under development,” the Treasurer is expected to say according to an excerpt of the speech distributed by his office.

“In the shorter-term scenario, the oil price stays at $100 per barrel for the first half of this year and then gradually returns to pre-conflict prices by the end of the year.”

“The more prolonged scenario has the oil price reaching $120 per barrel in the first half of the year and then takes three years to get back to its pre-conflict price.”

“Even with these conservative assumptions, Treasury’s latest advice is the war could cut GDP growth by up to 0.2 percentage points across our major trading partners. In both cases, inflation rises and growth is hit,” Dr Chalmers will warn.

On Thursday the Prime Minister will also convene an emergency national cabinet meeting to address the growing fuel crisis, with leaders expected to particularly focus on getting supplies to regional areas that are facing diesel shortages.

“To ensure that coordination, that’s occurring right across our country, maximises the benefit for business, for farmers, for our communities, in our cities, and in particular, in our regions,” Mr Albanese said.

The Nightly has been told leaders are expected to appoint a supply chain tsar to oversee Australia’s response to the damaging effects of the continuing Middle East conflict.

Already, premiers and motoring groups say fuel rationing shouldn’t be on the agenda but are demanding greater vigilance from the competition watchdog on petrol price monitoring.

In a speech to the Australian Automotive Dealers Association on Wednesday, the PM described the US-led attacks against Iran as the third global shock this decade and warned there will be further aftershocks from the war, even after it’s ended.

“It will have a long economic tail just as COVID followed by the Russian invasion of Ukraine have both had an impact on your industry and on the lives of everyone right around the world,” Mr Albanese said.

Mr Albanese noted Australia was vulnerable to global supply chain shocks because it is often at the end of the supply chain, which wasn’t as big a concern in previous decades when the geopolitical environment was more stable and predictable.

“It’s a different world now. We need to acknowledge that and we need to respond to that,” Mr Albanese said as he flagged the government would detail further steps to shield Australia from the impacts of the war in coming days.

“We want to make sure that we do everything we can to shield the Australian economy, households and businesses from the worst of global uncertainty”.

“That will also be a focus of our budget coming up in May, but we won’t be waiting until the budget. We’ll have more to say through the actions we’re taking in the days ahead.

“This new global challenge demonstrates that we must keep building Australia’s self-reliance and our economic resilience,” Mr Albanese said as he warned the world cannot simply hope for the period of growth and free trade to return.

West Australian Premier Roger Cook says he has just met with oil and gas giant BP to discuss how the company can get fuel from a more diverse range of suppliers to address possible supply constraints that may emerge.

NRMA spokesman Peter Khoury has told The Nightly proposals to introduce fuel rationing do not need to be discussed at Thursday’s meeting but has urged all governments to quickly approve stronger powers for the consumer watchdog.

Opposition frontbencher Jonno Duniam declared the meeting of state and territory leaders would be a “real test” of the Albanese government.

“We need to be doing more here, as I know others have said, to bring on exploration and refining of fuels here in Australia that will help our economy continue to grow,” Senator Duniam said.