Middle East tensions could drive fuel costs higher, pressure investment

Western Australian businesses and households are being warned to brace for another spike in fuel prices and broader cost-of-living pressures, as escalating tensions in the Middle East ripple through global energy markets.

Chamber of Commerce and Industry WA Chief Economist Dr Daniel Kiely said the renewed volatility would have a direct impact through higher fuel costs and supply chain pressures.

“The escalation in the Middle East is likely to push fuel prices higher in the short term, which will flow through to the cost of goods and services across the economy,” he said.

But while the immediate impact will be felt at the bowser, Kiely says the bigger risk lies in how prolonged uncertainty affects business confidence and investment decisions.

“Earlier in the conflict, there was an expectation it could resolve relatively quickly, and businesses were planning on that basis,” he said.

“Now, with no clear end in sight, we’re seeing greater caution. Businesses are delaying or reconsidering major investment decisions as uncertainty increases.”

That hesitation comes at a time when many businesses are already managing rising operating costs and tighter margins.

Calls for fuel excise discount to continue

Recent CCIWA business survey data showed the majority of businesses were being impacted by fuel price increases and supply uncertainty, with many reporting higher transport, energy and supplier costs.

CCIWA CEO Will Golsby said governments needed to act quickly to provide certainty and avoid compounding the pressure on businesses and households.

“CCIWA has said from the outset of the Middle East conflict, businesses need certainty, stability and clear communication,” he said.

“If the fuel excise cut is coming to an end, the Federal Government needs to outline its plans to minimise disruption and ensure fuel supply.

“One area of concern is how demand surges will be managed, and what impact that will have on supplies, particularly in regional areas. We can’t afford a return to the situation we were confronted with in March.

“Given there’s no real end in sight to the conflict in the Middle East, we believe there is merit in extending the excise cut and reviewing it on a rolling basis.”

Golsby said there was a strong case to extend the fuel excise relief beyond June 30.

“In the longer term, both the State and Federal Governments should consider what measures could be taken to ease pressure on households and businesses, including payroll tax reductions, freezing fees and charges and fuel vouchers for businesses locked into fixed-term government contracts,” he said.

CCIWA is continuing to monitor how the fuel crisis is affecting WA businesses.
Go to our Middle East Crisis Hub for services and support.
Share your experience via our latest Business Confidence survey. Survey closes June 19 (plus, by taking part in the survey, you have a chance to win $500).