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How to resolve AdBlock issue? Sydney Uni professor breaks down Iran war impacts on our economy
By Leon Gettler, Talking Business >>
HOW LONG will we be feeling the effects of the Middle East War?
According to professor David Ubilava from the University of Sydney it could take months to repair the infrastructure. That’s even if the war ends tomorrow.
“Even if this war ended today, it doesn’t mean markets will go back to normal tomorrow,” Professor Ubilava told Talking Business.
“It will take time. No one has a crystal ball to know how long it will take.”
Prof. Ubilava said war in the Middle East affects Australian producers and consumers through more than just petrol prices. However, fuel costs remain by far the most impactful factor in food supply chains. 
Fuel and fertilizer hit
The Middle East conflict has spiked Australian fuel and fertilizer prices by disrupting shipping through the Strait of Hormuz, forcing oil above US$100 a barrel and halting key urea shipments.
With Australia importing about 90% of its fuel and relying on the region for urea fertilizer, farmers are facing soaring input costs just before winter cropping, threatening higher domestic food prices.
That said, surging fertiliser prices, caused by the very same supply chain issues, will hurt Australian farmers and, potentially, consumers. The impact of fertiliser prices alone on grocery prices is likely to be modest, he said, but it remains a factor that cannot be neglected, especially should its availability become an issue
Prof. Ubilava said fuel would be available in most places but it will be considerably more expensive. That, he said, would narrow the margins of farmers.
“There are two aspects here,” he said. “One is the price and the other is the availability.
“The price effect is bad for famers but it’s something they’ll absorb. Our farmers are large commercial producers, they tend to absorb these shocks of input costs.
“Where it becomes tricky if no fuel is available, then no activity can take place.”
Fertilizer pain on the horizon
Prof. Ubilava said while the impact of fuel prices is there for everyone to see, the impact of fertiliser shortages is not that clear.
“Agricultural commodity is a very small share of the food item that we buy,” Prof. Ubilava said.
“As an example, wheat is 5-7% of the cost that we pay for a loaf of bread. The majority of the costs that we pay comes to you from marketing margins, and probably a larger share of it is fuel prices.”
He said this translated into food inflation through the supply side effects and he did not expect this would add pressure to grocery bills.
“While there are inflationary pressures at the moment, I do not believe that the current price shocks will translate into the levels of inflation we saw two or three years ago,” Prof. Ubilava said.
He said fertiliser shortages would not translate into higher priced grocery items.
“Probably fuel prices will have a bigger effect if at all, but how large this effect will depend on how long this conflict will last,” Prof. Ubilava said.
“If the conflict resolves itself in the next couple of weeks or so, then there’s probably a good chance we’ll return to normalcy soon.
“But if it were to linger for multiple months, then I would be much more pessimistic about what will happen to food prices.
“So fuel prices, more than fertiliser prices, will likely drive food inflation.” 
Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness
https://shows.acast.com/talkingbusiness/episodes/talking-business-8-interview-with-david-ubilava-from-the-uni
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