Rising Fuel Prices and the Knock on Effect

We’ve all felt the sting at the fuel pump lately as petrol prices have continued to rise over the last few months. For now, there doesn’t seem to be an end in sight as prices everywhere reach over 2 dollars a litre, hitting historical highs. Of course, the most evident aspect of all this is that rising fuel prices are symptomatic of a much larger economic issue, which is a cost of living crisis.

What is causing the price of fuel to skyrocket? Well, there are a number of factors at play but the ongoing war in the Ukraine is a major contributor. Further to that, a recent fire in a South Korean oil refinery hasn’t helped the issue either. Most people would be aware that petrol prices tend to rise and fall in union with the cost of crude oil, which is dependent on supply and demand. Let’s not forget that the world was basically brought to a standstill over the last two years and now with everything having opened back up, demand is high once more. As all these factors are affecting both the supply as well as the demand, the prices are skyrocketing. 

We must consider the effects of higher fuel prices on the wider economy starting with the cost to transport fuel. The companies delivering fuel across the world are finding themselves directly affected which essentially means that they have no choice other than raising their prices as well. The problem echoes through all parts of the supply chain, from the shippers to the receivers. Thus, we see the prices in products inflate as a result of items such as meat, vegetables and fruit. For transport companies, this is necessary for helping make up the costs. Some of these businesses might decide to limit the frequency of deliveries to save fuel but this is a double edged sword as it means the business is making less money. 

Right now, the fuel excise is in motion but that won’t last forever as the government will run out of funds to finance the discount (the current cut costing close to 3 billion dollars). This means that once it’s over, the petrol prices will become even greater, furthering the blow for consumers. 

Look at how rising inflation has forced the reserve banks’ hand in raising the interest rate, leading to those with mortgages facing higher repayments. The only upside for higher interest rates is that we will see a drop in house prices down the line, which will benefit those that are yet to purchase property. 

As people struggle to make ends meet, we need to find ways to effectively combat inflation and the rising cost of living. Right now, there isn’t a lot that can be done unless employers raise wages. One method to combat the rising cost of living however, is investing, particularly in alternative assets. Cryptocurrency is extremely risky at the moment as the prices have been volatile to say the least with many investors losing big time. Therefore, alternative assets, specifically those focused on green technology are a great way to go. Many green investments are looking at technology that will cut down on the need for petrol and electricity making rising fuel prices of little concern. 

So, as the everyday consumer attempts to combat the rising costs of living in any which way they can, think about ways you can invest to ease your burdens.