Ripple effect from Iran oil row

Tensions over oil exports between Iran, the United States and the European Union could have a ripple effect that may raise petrol prices to around $1.65 a litre, an analyst has said.

“If there was an embargo on Iranian oil and conflict escalated in the Middle East, then you could be looking at maybe $115 - 120 a barrel, so another $15 to 20 added to the world oil price,” said AMP Chief Economist Shane Oliver.

“The last thing economy wants is a sharp surge in the petrol price, given the pressure the economy is already under, with job layoffs and very low levels of consumer confidence,” Mr Oliver told SBS.

On the rule that each $10 dollar hike in the crude price adds 10 cents per litre at the pump - a 15 to 20 cent rise would take petrol to around $1.65 per litre.

The European Union has decided to implement an embargo on Iranian oil, and Saudi Arabia has offered to fill the gap it leaves.

Of Iran's key southern European oil customers - crisis-ridden Greece may have the most to lose.

Greece held up an accord on the embargo, as it relies on Iran for more than a third of its imports, which are bought on very favourable terms.

There are also a real threat of conflict with the US as tensions rise over Iran's threatened closure of key oil shipping channel, the Strait of Hormuz.

The US has ships stationed in the Persian Gulf near the strait, and Iran claims one of its warships was recently filmed in its territory.

"Iran will not submit to that kind of pressure and will in fact ratchet up the tensions," Professor Shahram Akbarzadeh from Melbourne University has told SBS.

"I think Iran is careful and is ... trying not to initiate military action," Prof Akbarzadeh said.

"But .. there's a lot of pressure in the grass roots in Iran that want conflict," he added.

"Hostility toward the West is very much at the heart and the logic of the Iranian regime, so it will be difficult to avoid conflict," he said.

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