Australian households face prospect of interest rate hike and petrol prices rising above $2 a litre

Crude oil prices are likely to stay elevated for ‘at least a year’ as the US-Iran war enters a new and more dangerous phase, an expert warns. Photograph: Joel Carrett/AAP View image in fullscreen Crude oil prices are likely to stay elevated for ‘at least a year’ as the US-Iran war enters a new and more dangerous phase, an expert warns. Photograph: Joel Carrett/AAP Australian households face prospect of interest rate hike and petrol prices rising above $2 a litre Economists’ warning comes as escalating Middle East crisis pushes global crude oil back above $US100 a barrel Get our breaking news email , free app or daily news podcast Australian households face the prospect of a Reserve Bank interest rate hike and petrol prices above $2 a litre over the coming weeks, economists warn, as the escalating Middle East crisis pushes global crude back above $US100 a barrel. Financial markets now see an even chance the RBA board will deliver a fourth cash rate increase at the next meeting on 11 August. Warwick McKibbin, the director of the ANU’s Centre for Applied Macroeconomic Analysis, said crude oil prices were likely to stay elevated for “at least a year” as the US-Iran war entered a new and more dangerous phase. Sign up for the Breaking News Australia email The Houthis’ blockade of Saudi Arabian oil through the Red Sea and the Ukrainians’ increasingly successful destruction of Russian energy infrastructure had heaped further pressure on global oil supply, McKibbin said. “Getting access to supplies looks different now than it did a few months ago. All the reserves have been run down, particularly in the US. It’s quite a serious situation for the world to be in.” The phasing down of the government’s fuel tax relief to 16 cents per litre and this month’s 37% jump in the international Brent crude benchmark has pushed the cost of unleaded to $1.80 a litre, up from a recent low of about $1.50 at the beginning of the month, according to Motormouth. Graph showing average daily price for a litre of fuel in Sydney Johnathan McMenamin, a senior economist at Barrenjoey, said higher global prices and the end of the remaining fuel excise discount after 2 August meant unleaded would march back above $2 a litre over coming weeks. “That is an uncomfortable level for households, but it isn’t something we are too unfamiliar with,” McMenamin said. Diesel prices are up by about 50 cents in July to about $2.20 a litre in the major East Coast cities. Climbing fuel prices will be another blow to the Reserve Bank’s efforts to bring inflation down while managing the damage to the economy from high energy costs. McMenamin believes the central bank will pull the trigger next month – a view he had even before the latest developments in the Middle East. “People will start to see fuel prices go up again, and the concern will be that inflation expectations will once again lift among households and businesses,” he said. “It does matter for how long the oil price is $US100 a barrel – if