Key facts
- The IMF warns the global economy could soon test resilience due to depleted emergency oil stocks and strained government budgets.
- A scenario where oil prices jump to $130 a barrel could push Australian petrol prices up by 30 cents a litre.
- Higher fuel prices could increase inflation by more than 1 percentage point.
- The IMF described a scenario where conflict persists through June 2027, keeping key shipping straits closed and delaying oil supply recovery.
The International Monetary Fund has warned that the global economy faces a "clear and present danger" from depleted emergency oil stocks and strained government budgets, potentially pushing oil prices to $130 a barrel. This scenario, modelled in the IMF's World Economic Outlook, stems from a hypothetical worsening of the Middle East crisis extending through June 2027, which could keep key shipping straits closed and delay oil supply recovery.
An IMF scenario where oil prices reach $130 a barrel could push Australian unleaded petrol prices up by another 30 cents a litre, from over $2.40 currently, and diesel prices remain high at about $2.80. Economists suggest this could leave inflation more than 1 percentage point higher than expected by year-end, exacerbating cost-of-living pressures and potentially prompting the Reserve Bank of Australia to hike interest rates further. The RBA's current inflation forecast assumes Brent crude prices fall to $81 a barrel.
Minutes from the RBA's last meeting noted that "global cost pressures appeared to be building" and that "the Middle East conflict had escalated and oil prices were substantially above the level assumed in the August forecasts." Jonathan McMenamin, head of economic forecasts at Barrenjoey, expects inflation to lift to 4.2% in the year to September, with every 10% rise in fuel prices directly adding 0.33 percentage points to headline inflation.