It may seem counterintuitive, but, in my view, the odds of a Reserve Bank of Australia (RBA) rate hike next week are falling by the minute.
If the Iran war continues at its current intensity and the Straits of Hormuz remain closed, the oil price will be $200 next week, on its way to $500 or whatever price is needed to crush 17% of global demand.
There will be widespread hoarding and panic, both domestically and internationally, and because of Australia’s inadequate preparation, our one-month fuel reserves will be depleted much faster than planned.
Local petrol prices will be at $5 per litre; on their way to double that.
The entire economy will come to a complete halt, leading Australia into a recession, if not a depression.
It could get so bad that all petrol is nationalised and prioritised for the distribution of food and other critical products, leading to severe restrictions on personal vehicle use and significant changes to transportation logistics across the country.
Welcome to your oil lockdown.
Albo’s morons appear to understand none of this, still blaming it all on One Nation.
There is no way known that the RBA will be hiking under these circumstances.
Indeed, they may have to make emergency cuts, as an unemployment shock accounts for a large share of the oil demand destruction that will be needed.
The Australian bond market continues to price the oil shock as a normal inflationary outcome.
However, with oil prices at $109 today, we are already approaching demand destruction levels.
At $200 by week’s end, if nothing improves, we will be in the early stages of a major economic downturn.
I’m not sure at what oil price the bond market wakes in fright to realise it needs to price crashing growth, not rising inflation.
But I can confidently predict that it will occur within the next few days ceteris paribus.
In short, forget the RBA.
Start worrying about how to feed Australians in a nation without petrol supplies.
