By Kaya Selby, RNZ Pacific journalist
Analysts are warning fuel prices are expected to jump in the Pacific following the Israeli and US attacks on Iran, and the retaliatory response by Iran.
Iran borders the Strait of Hormuz, which carries 20 percent of the world’s oil and gas supply, and shipments have been suspended following the attacks.
Crude oil prices could climb as high as US$100 per barrel, leading to widespread concerns the Middle East war could precipitate into “a global energy crisis”.
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Pacific Island fuel prices are generally high and volatile due to import dependency and shipping distance.
Saul Kanovic, an energy sector analyst at MST Financial in Sydney, told RNZ Pacific the “threat is severe”.
“If the situation doesn’t de-escalate and the passage through [the Strait of Hormuz] remains significantly disrupted, we’re looking at a global energy crisis that we haven’t seen since the 1970s,” Kanovic said.
“This could be bigger than that.”
Isolated nations suffer
Kanovic said that more isolated nations with less diversified economies would suffer from a greater exposure to these price shocks.
“Cost of transport is going to go up from a fuel cost perspective, but we might also see insurance premiums rising.”
In the Pacific, imported fuel is usually paid for by forward contracts in advance, and in bulk orders that can last months, as a hedge against price shocks.
But the impact could embed itself into freight costs, both for shipping and air, which in the Pacific is already relatively high given the distance.
Glen Craig, Vanuatu’s special envoy for international development, told RNZ Pacific the severity of the impact would depend on whether the duration of the conflict outpaced a Pacific nation’s petroleum reserves.
Not yet ‘panicking’
“No one is panicking now, but there is definitely going to be some fuel price increases at some stage,” Craig said.
“We should be okay, but it depends on how big and how long this conflict is going to go for.”
When it hits, Craig said it would likely be reflected in all imported goods on Pacific shelves, as well as tourism and regional travel.
“It’s a bit like if you’re on a busy motorway, and there’s an accident on the road 30 km ahead; it might take half an hour to trickle down to the end, but it eventually gets to you.”
“I would dare say we’re looking at something in maybe four months’ time.”
Papau New Guinea set to ‘definitely benefit’ – minister
Papua New Guinea’s Foreign Minister Justin Tkatchenko saw some potential upside for his country as a petroleum and oil exporter.
“It will definitely benefit PNG, but then there’s the other side, where fuel prices for the domestic market will then go up,” Tkatchenko said.
PNG is predominantly a petroleum gas exporter, with China, Japan and Taiwan as its biggest importers.
With LNG prices impacted by the Middle East, but PNG protected by distance, it leaves a shortage that they can fill.
“Unfortunately, it’s the consumers that will cop it, the people, and they are the ones that end up paying for it,” Tkatchenko said.
“So yeah, it’s good in one way, but definitely won’t help out people in the long run.”
A higher price means a higher tax take. According to its 2025 budget, PNG’s mining and petroleum tax drew in roughly US$971 million, a 16.5 percent increase from 2024.
The MPT, which is linked to gains from the sale of mining and petroleum goods, comprises PNG’s second largest source of tax revenue.
It may put the government in a position where it can commit to supporting consumers through any eventual price shock, as Prime Minister James Marape told local media over the weekend.
This article is republished under a community partnership agreement with RNZ.
