Oil price spike could hit Australian motorists

Australian motorists are facing renewed anxiety as oil prices have dramatically increased over the past 24 hours. Analysts warn this could translate to higher prices at the pump if the trend continues.

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As a matter of FAIRNESS, [the US] will be reimbursed, at the rate of 20 per cent on all cargo shipped, for any and all costs necessary to do the job of providing safety and security to this very volatile section of the World.

The surge in oil prices is directly linked to escalating tensions in the Middle East. US President Donald Trump amplified these concerns by announcing on his Truth Social platform that the United States would henceforth act as the "guardian of the Hormuz Strait." He declared that the US would seek reimbursement at a rate of 20% on all cargo shipped through the vital waterway for providing security.

The price of West Texas Intermediate (WTI) crude oil rose 5% immediately after Trump's post, and by midday in Asia, it gained another 1.4% to $US79.28. Brent crude is up approximately 10% since Monday afternoon to $US84.19.

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The problem with the MOU was that it was deliberately vague.

Previously, oil prices had fallen due to a Memorandum of Understanding between the US and Iran. However, Middle East analyst Will Todman noted the MOU's vagueness allowed for differing interpretations, contributing to its recent breakdown. Iran's announcement of closing the Strait of Hormuz, through which about 20% of the world's oil and gas supplies flow, further exacerbated the situation.

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It's logical that oil goes up because obviously there are [always] fears that Iran will close or partially close the Strait of Hormuz.

Commsec Equity Market Strategist James Gruber stated it's logical for oil prices to rise due to fears of Iran closing the Strait. Analysts also believe Trump's social media activity has worsened existing tensions. National Australia Bank senior analyst Jason Wong commented that Trump's pronouncements are unpredictable but likely to displease Gulf allies and may violate international law, potentially adding about $US16 to the cost of each barrel of oil. It remains uncertain if Trump's plan will be implemented or if it serves as a negotiating tactic.

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With Trump one never quite knows how seriously to take such pronouncements, but Gulf allies would not be pleased with this plan and it almost certainly violates international law.