Expert 'wouldn't be surprised' if Aussie petrol prices hit $2.50

A leading Australian energy expert has said he "wouldn't be surprised" if Australian petrol prices hit as high as $2.50 a litre as the oil market is squeezed by multiple factors.

"COVID smashed oil consumption, oil prices and investment in supply in 2020.  There is also a growing global consensus about the need to reach net zero by 2050 and therefore that peak oil demand is imminent and there is no need for further exploration," Mr Bethune wrote.

"That has all discouraged investment in supply. Since 2020 oil demand has roared back with the post-COVID recovery but even OPEC is unable to achieve its production targets. That has all put pressure on prices.

"Then, on top of that there is all the uncertainty created from the Ukraine situation and the Russian invasion."

As a result, Mr Bethune said he "wouldn't be surprised if they [Australian petrol prices] got to $2.50".

While at the higher end of some estimates, Mr Bethune's conclusion that soaring oil prices would impact the wallets of motorists is shared by many experts.

Two days ago Chief Economist at CommSec Craig James said petrol prices are "on course" to hit as high as $2.20 over the next few weeks.

"The Australian terminal gate or wholesale price is around $1.78 a litre. Add a gross retail margin of 12-13 cents a litre and the national average price is likely to lift to $1.90 a litre," Mr James wrote in a research note.

"And based on the US$20 lift in Brent crude last week, average Aussie petrol prices will soon be $2.10 a litre."

Mr James said the flow-on effect of households stretching their budget to cover their fuel bill will be a reduction in non-essential spending, ultimately hurting the economy.

"The average Australian family is spending a record $257.46 a month on petrol, up $35 from the beginning of 2022," Mr James said.

"That is effectively 'dead' money or a tax on consumption, meaning that consumers have to either cut back on nonessential spending or dip into savings."

The NRMA's most recent Weekly Fuel Report showed that the average price of a litre of regular unleaded petrol is currently just shy of $1.90.