FARMERS will bear the brunt of escalating fuel prices in coming weeks as increasing tension between Iran and the West pushes international oil prices skywards.
Iran, which exports 2.2 million barrels of oil a day, has threatened to block access to Western ships operating in the Strait of Hormuz, a major route for oil shipments.
Prices crept up towards $US104 a barrel last week and anything above $US100/barrel adversely affects Aust-ralian businesses.
NSW Farmers president Fiona Simson said higher fuel prices would be a blow for farmers who relied on heavy vehicles to bring in farm inputs and to transport produce out.
"It's a double whammy and we can't pass the cost on. Farmers are price takers, not price makers," Mrs Simson said.
"Croppers are already hurting following low prices from the harvest, so it could be pretty disastrous for a lot of people. Fuel is one of the biggest costs for broadacre farmers and cropping enterprises."
NSW Farmers is calling on the federal government to retain the fuel tax credits scheme, where farmers receive a 38.1 cent rebate per litre of diesel used on farm, the same amount as the excise paid at the bowser.
Last year many feared the scheme would be wound back in the federal budget but it was retained, and is expected to cost more in coming years as more fuel is used ? $5.1 billion for the 2011-12 financial year, increasing to $5.6 billion for the 2012-13 financial year.
NRMA director Graham Blight said Australian fuel prices were based on Mogas purchased from Singapore and prices had increased by as much as $7 a barrel in recent days.
"That's a pretty big rise, and it's a reaction to troubles in the Gulf with the Iranians saying they could shut off supply," Mr Blight said.
"It is not being driven by new demand from anywhere, it is speculative."
But the relatively high Aussie dollar (US101.7 cents on Tuesday) helped offset the high cost of fuel, he said.
"Higher fuel prices always hit rural people hardest of any group, we drive further than anyone else and normally drive bigger vehicles and we get hit twice because we pay freight out and in.
"If you live in Sydney you can catch a train or a bus. We can't, we have to wear it, and the impact is not always pretty."
Mr Blight said having a strong independent fuel supplier in country towns helped to keep prices down.
He said, for example, at Albury/ Wodonga prices were equal to or lower than prices in Sydney due to a strong independent supplier, but at Wagga Wagga prices were much higher.
During the past year, fuel prices rose by about eight cents a litre, the Australian Competition and Consumer Com- mission (ACCC) said in a recent report, in line with the relevant international benchmark price (Singapore Mogas 95) and the exchange rate, but despite this, petrol prices in Australia remained among the lowest in countries part of the Organisation for Economic Co-operation and Development (OECD).
The ACCC estimated net profit to the petrol companies on each litre of petrol sold was about 2.2 cents.
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