Economists Warn Diesel Prices May Stay High for Years

Economist Saul Eslake warns that refined fuel prices, specifically diesel, could remain elevated for three to five years. Speaking at the BeefEx forum, Eslake attributed this trend to a widening crack spread, which is the price difference between crude oil and refined products. He noted that crude oil prices have recently exceeded $US100 a barrel.

Eslake identified several drivers for this sustained pricing, including the isolation of refineries in the Persian Gulf, damage to Russian refining capacity, and ongoing conflicts in Ukraine and the Middle East. Michael Spencer, CEO of MeOH Energy, added that the supply chain is further constrained by disruptions to shipping and refining capacity.

These energy costs, alongside Russian attacks on the port of Odessa affecting wheat exports, are expected to pressure profit margins for Australian feedlot operators and the broader agricultural sector over the next 12 months. Eslake argued that the Australian government's previous decision to cut the fuel excise was based on the mistaken belief that these price spikes were temporary.