Emanuel Datt
The current fuel crisis is reshaping how markets interpret energy risk, with fuel scarcity emerging as a more persistent economic constraint rather than a short-term cyclical factor, according to Datt Capital Chief Investment Officer Emanuel Datt.
Datt says, “The energy landscape is disrupted across multiple fronts. Fuel scarcity is probably here to stay for the medium term due to ongoing blockades, constrained refinery output, and export restrictions on key petroleum products.”
Beyond crude oil, Datt highlights broader vulnerabilities across energy, particularly in liquefied natural gas (LNG). Supply disruptions involving Qatar, which accounts for a significant share of global LNG exports, are exacerbating volatility across energy markets.
Domestically, Australia faces its own set of structural challenges, particularly in refined fuel products such as diesel and jet fuel. Datt notes the current situation has underscored the country’s limited refining capacity, leaving it exposed to global supply disruptions.
This vulnerability has prompted government intervention, including increased support for domestic refiners Ampol and Viva Energy. The level at which Federal government support commences for Viva’s Geelong refinery has increased from A$10.2/bbl to A$15.9/bbl refining margin, with the maximum support cap lifted 78% to A$13/bbl.
“The situation demonstrates that energy security is not just a price-driven exercise. Australia is likely to pursue a more balanced approach between imports and domestic production over time.”
Recent government measures, including underwriting oil shipments and relaxing diesel standards, signal a broader pivot away from reliance on market pricing mechanisms towards ensuring physical supply.
“This marks a notable shift in policy thinking. It speaks to the importance of hydrocarbons to a modern economy like Australia, in contrast to the current policy settings with the strong focus on renewables seen just five years ago. While Australia remains resource-rich, the key challenge lies in converting upstream production into usable fuel for domestic consumption, an area likely to see increased policy attention.
“Fuel is an input to almost everything. Higher energy prices will broadly increase the cost of doing business,” adds Datt
“We expect this to flow through in company announcements across the next reporting season. Sectors such as industrials, logistics, miners will have their profits disproportionately affected, whereas financial companies will be bit more insulated. However, I do expect there’ll be a consistent stream of earnings downgrades over the coming quarter.
“We have repositioned our portfolios towards a greater weighting towards energy exposures, because when energy becomes the constraint and demand remains relatively inelastic, we typically see stronger prices over the medium term.
“We are also maintaining elevated cash levels, anticipating potential market weakness and more attractive buying opportunities ahead.”
