The Trump administration has granted a waiver on US sanctions on Iranian oil already loaded on tankers, a dramatic turn of events during wartime to release a glut of oil on the global market as petrol prices get out of control.
US Treasury Secretary Scott Bessent announced the waiver on Friday US time, releasing 140 million barrels of Iranian oil for sale on the global market.
The waiver, which is valid until 19 April, only applies to Iranian oil already on tankers as of midnight on 20 March and does not allow for new Iranian oil to be purchased or extracted.
In about two weeks, the administration has waived sanctions three times.
An attempt to stabilize crude markets shaken by the US and Israeli military campaign against Iran, which started on February 28, Washington earlier relaxed sanctions on Venezuela’s state oil company and relaxed restrictions on Russian oil shipments.
The International Energy Agency has called this the biggest supply disruption in history due to Iran’s effective closure of the Strait of Hormuz, which normally carries about one fifth of the world’s oil supply.
However, the paradox at the heart of this decision has sparked fierce criticism from both sides of the American political divide.
America is currently bombing Iranian military and nuclear targets while at the same time allowing the Iranian regime to sell its oil, which could potentially be used to fund its war efforts.
The administration has claimed that the Iranian regime was already selling the majority of this oil to China at a deep discount and that the waiver is merely directing this oil towards America’s Asian allies at a more reasonable price.
It has also claimed that the Iranian regime would not be able to access the revenue from this oil due to its inability to access the international financial system.
What it means for Australia
On the other side of the globe, the repercussions are being felt very strongly. Australia is extremely susceptible to shocks to the world’s crude prices because it imports about 90% of its refined liquid fuel.
According to NRMA data, the average price of gasoline has increased by roughly 50 cents per litre since the start of the conflict, with unleaded fuel in Sydney rising from about $1.58 to more than $2.26.
Australia has an estimated 36 days of petrol, 29 days of jet fuel and 32 days of diesel. This is the largest stockpile in 15 years.
However, it is still far off from the IEA’s recommended 90 day supply.
There is no need to panic as there is no immediate supply issue. Some service stations have already dried up as a result of panic buying.
Real issue is whether the waiver will have any effect. The 140 million barrels equate to one and a half days of global oil consumption.
The administration will soon face the same crisis again, but with no emergency tools at hand.
