Renewed conflict in the Middle East has pushed global oil prices higher, prompting concerns about fuel costs, shipping expenses and inflation.

For Australia, New Zealand and the Pacific, the immediate issue is not whether oil is imported directly from the Middle East. It is how higher global energy prices affect one of the world's most interconnected trading regions.

Australasia depends on reliable shipping.

When fuel becomes more expensive, moving goods across the Tasman Sea and throughout the Pacific becomes more costly, affecting exporters, importers and consumers alike.

Trade is the region's economic lifeblood

Australia and New Zealand trade billions of dollars' worth of goods and services every year under the Australia–New Zealand Closer Economic Relations Trade Agreement (CER).

Fresh food, manufactured products, building materials, pharmaceuticals, machinery and professional services move regularly between the two countries.

Pacific Island nations also rely heavily on maritime transport for imports ranging from fuel and food to medical supplies and construction materials.

Shipping is not simply another industry. It is the infrastructure that keeps the region connected.

Fuel affects every container

Modern cargo vessels consume significant quantities of fuel.

As fuel prices increase, shipping companies face higher operating costs.

Initially, many absorb part of the increase or recover it through fuel adjustment factors and freight surcharges.

If elevated oil prices persist, however, those costs eventually become part of international freight rates.

For exporters, higher freight costs can reduce competitiveness.

For importers, they increase the landed cost of goods.

Pacific nations are particularly exposed

Small island economies often have limited shipping options and relatively small markets.

That means freight costs account for a larger proportion of the final price consumers pay.

A sustained increase in shipping expenses can therefore have a greater impact on inflation in Pacific nations than in larger economies with more diversified transport networks.

Many islands also depend heavily on imported fuel for electricity generation, transport and essential services.

Australia and New Zealand face indirect pressure

Neither Australia nor New Zealand is likely to experience immediate trade disruption solely because oil prices have risen.

The larger challenge is cumulative.

Higher shipping costs can influence:

• Food exports.
• Agricultural imports.
• Manufacturing supply chains.
• Retail pricing.
• Tourism operations.
• Construction materials.
• Cross-border business investment.

Trade continues to flow, but the cost of moving goods gradually increases.

Tourism also depends on affordable energy

Australasia's tourism industry relies on aviation, cruise ships and road transport.

Higher aviation fuel prices can place upward pressure on airfares.

Cruise operators and regional transport providers may also face higher operating costs.

Although travel demand has remained resilient in recent years, prolonged energy price increases can influence travel decisions and business profitability across the region.

Will trade stop?

Almost certainly not.

Australasia has developed resilient supply chains and diversified trading relationships over many decades.

The region has successfully navigated global financial crises, pandemics and previous shipping disruptions.

The greater risk is not that trade ceases, but that it becomes more expensive.

Those additional costs eventually work their way through businesses and households.

What should exporters and importers watch?

Businesses engaged in trans-Tasman and Pacific trade should pay close attention to:

• International shipping costs.
• Fuel surcharges.
• Insurance premiums for shipping.
• Container availability.
• Exchange rates.
• The duration of the current conflict.

The length of the disruption will be more significant than the initial oil price spike.

The Australasian View

Australasia has built its prosperity on open trade, reliable shipping and close economic cooperation. Rising oil prices do not threaten that foundation overnight, but they do remind the region how closely connected global events remain to local economies.

The issue worth watching is not simply the price of crude oil. It is whether higher energy costs become embedded in the movement of goods across the Tasman and throughout the Pacific. If they do, the effects will be felt not only by exporters and importers, but by households across the region through higher prices and slower economic growth.