AUSTRALIAN motorists are likely to see the worst of the impacts of the Ukraine / Russia conflict on fuel prices in around three weeks when the lift in wholesale prices filters through to send already bloated costs at the bowser up even further.
Already, prices have kicked over $2 a litre in some centres and with crude oil prices hitting $100 a barrel for the Brent benchmark for the first time since 2014 without the presence of Russia, the world's second largest exporter of oil, in the market the expectation is that fuel costs will continue at very high levels at least until there is more clarity surrounding the conflict.
Fuel industry analysts believe prices could reach $2.10 in metropolitan areas, meaning even higher prices in rural and regional Australia.
However, Australasian Convenience and Petroleum Marketers Association chief executive Mark McKenzie said that while some were taking a gloomy view of a sustained period of record high retail fuel prices there were several factors to suggest this might not be the case.
He pointed to the dip in futures prices after the initial spike when war was declared last week.
"There were big gains on futures as war was declared but then the market took time to reflect and perhaps it was felt that a lot of the risk premium had already been built into the market, so we actually saw Brent futures drop back below $100 (US$100 a barrel," Mr McKenzie said.
He said there was significant scope for global production to be ramped up to meet the Russian shortfall, particularly with prices where they are.
"Oil supply chains are not like flicking a light switch, it takes time to scale up or scale down pricing, but with values where they are there is definitely the incentive for those with capacity to produce more oil."
"Many suppliers have taken a careful approach to increasing capacity post-COVID-19, which saw a collapse in demand and consequently the lowest fuel prices we have seen for years, so there is definitely capacity to boost production."
Mr McKenzie said the Russia / Ukraine war had altered the dynamics of the energy sector.
"We had seen prices creeping up post the peak of COVID-19 until the end of October and then as more production came on line things started to ease slightly, providing some relief, which was expected to continue until the rapid escalation of this conflict."
"It has been somewhat of a surprise how fast futures have gone up, we've seen a 20pc lift in futures entirely driven by this risk premium but I think we could see prices come off if production emerges elsewhere to pick up the slack of Russia not being in the market."
However, Mr McKenzie said the Aussie consumer had one thing against them they did not have last time global fuel prices rose to these levels in 2013-14.
"Currency is killing us.
"Last time we saw world prices like these the dollar was at US92c, it's now around US72c, so we're 26pc worse off on that front."
Mr McKenzie said he did not think the fuel prices were at levels that would stop Australian motorists from driving just yet.
Instead he said there would be a switch from higher quality products to lower grades.
"What we have seen in the past is those that use 98 grade fuel move down to 95, those that use 95 go down to 91 to cut a few costs.
"We're already starting to see that happening this time around."
Start the day with all the big news in agriculture! Sign up below to receive our daily Farmonline newsletter.