Farmers warn of price rises in supply chain due to petrol spike
Farmers have warned Australians will face higher food prices even after the federal government began producing 760 million liters of petrol and diesel from domestic reserves to boost regional supplies.
As Australia enters a third week of soaring oil prices due to war in the Middle East and state governments hold emergency meetings, Energy Minister Chris Bowen has authorized fuel companies to begin securing up to six days’ supply from national reserves.
After an emergency roundtable following meetings in Queensland and Victoria on Monday, the NSW government threatened to use emergency powers to divert supplies if the fuel industry does not prioritize fuel-short areas and told petrol stations to submit online declarations if they empty their tanks.
The moves come against a backdrop of rising inflation, partly due to oil prices, which the central bank will consider when deciding whether to raise interest rates at its monthly meeting on Tuesday.
National Farmers Federation chief executive Hamish McIntyre said continued pressure on petrol, diesel and fertilizer prices could mean consumers paying more at the till as higher costs are passed along the supply chain, putting farmers under pressure to make tough decisions.
“Farmers are price takers, which means increased fuel costs are largely borne on farm, cutting into already tight margins,” McIntyre said.
“If things do not improve quickly and farmers are forced to cut production or reduce plantings, it is reasonable to expect this to put pressure on food prices.”
The fluctuating price of Brent Crude Oil, an important indicator on a global basis, was hovering around US$100 ($142) per barrel on Monday. In Australia, bowser prices have risen to over $2.20 per liter for unleaded petrol and $2.60 for diesel.
The federal government’s move to release 20 per cent of Australia’s reserves, announced last week, frees up 213 million liters of petrol and 548 million liters of diesel; this last one powers almost all trucks. But the fuel will only flow when companies tell the government how they will prioritize regional areas.
Farmers are already grappling with the closure of the Strait of Hormuz, which has cut off two-thirds of Australia’s fertilizer from the Gulf states.
NSW Farmers Union economist Samuel Miller said producers would decide whether to plant crops such as wheat by taking fuel and fertilizer prices into account.
“I expect price shocks to come to the retail industry very soon, and then we’ll wait and see if these higher prices and limited fuel supplies will impact the amount of food grown, which could further impact prices for consumers,” Miller said.
Fresh produce charity Freshmark CEO Meegan George said Australia’s food ecosystem was resilient because it often faced natural disasters. He said some domestic food prices could actually fall due to the inaccessibility of some overseas markets.
“If products destined for export markets cannot be transported overseas, they often end up in the domestic market, which can temporarily increase supply and soften prices,” George said.
Alex Osipovich, owner of North Sydney service station Bobbin Head Garage, said business had been going mostly smoothly for the past seven years but recent geopolitical crises had left him feeling like “everything was collapsing”.
Osipovich said the independent gas station has been paying wholesale fuel prices up to 50 cents more per gallon than major retailers for weeks.
“The big giants don’t give us very good chances. I can’t compete with them,” Osipovich said.
“If I continue doing this, I will have to sell fuel below cost, meaning I will lose money instead of making a profit, and I will also have to pay the salaries of my nine staff.
“I might have to close the place down and put up the sign instead of continuing to work backwards.”
A paper from Monday’s NSW roundtable told fuel retailers to use the state’s FuelCheck app to notify when fuel is unavailable; this allowed drivers to identify nearby fuel supply stations.
The state’s watchdog agency Fair Trade will also increase monitoring of price differences between gas stations’ online ads and what they offer in person.
Premier Chris Minns said it was vital the province planned “for every contingency”.
“While global fuel supply challenges are beyond our control, there are practical things we can do in NSW to ensure fuel is distributed to where it is needed most, particularly regional communities,” Minns said.
Victoria introduced a rule forcing petrol stations to set maximum daily prices after its own roundtable last week. NSW has not adopted this measure.
At the federal level, former Nationals leader Barnaby Joyce said the Coalition made a mistake by paying $95 million to build Australian fuel reserves in the US when Angus Taylor became energy minister in 2020.
Taylor dismissed the criticism on Monday, telling reporters: “We’ve made sure the remaining refineries stay in this country and we want to see Australian fuel working for Australians. Barnaby Joyce should say that. He hasn’t.”
With Elias Visontay
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Jessica Yun is a business reporter covering retail and food for The Sydney Morning Herald and The Age.Connect with: X or email.
Paul Sakkal is the chief political correspondent. It has previously covered Victorian politics and won the Walkley and Quill awards. Reach him securely on Signal @paulsakkal.14Connect with: X or email.
Cindy Yin is an urban affairs reporter for The Sydney Morning Herald.Connect via email.
