Fueling the problem
With the volatility of the conflict in Iran developing daily as to how far it will escalate or not, its early days yet to determine the long term effects, certainly we’re feeling it at the fuel pump right now.
Putting it into perspective, on a personal usage level, allowing for variations, if you take the average private commuter travels around 15,000 kms pa and the average combustion engine vehicle uses about 10 litres per 100 kms combined city/highway cycle that’s 1,500 litres pa or 125 litres per month. Add the price per litre of 91 octane a month ago at $2.49 litre, on 125 litres is about $311 mth, now at $3.33 litre it’s $416 or a $105 mth / 33% increase. If it goes to $4.00 litre the same 125 litres is $500 mth or $189 mth / 60% increase.
Diesel on the other hand has gone from $1.80 litre a month ago to about $3.20 litre now, an increase of 77% or $175 mth on the same 125 litres.
While those percentage increases are huge in a month, it’s on a relatively small volume for average personal use. So the increase of $105 mth is $3.50 a day which is one coffee less every 3 days and $175 mth is $5.80 day or one less beer at your local every 2 days – meh!
Commercial and industrial use on the other hand uses copious amounts of diesel comparatively and is a whole other matter and lets not even talk about jet fuel. Fuel is a key metric in the cost of production and distribution of everything we buy which in turn gets added to the cost of goods on the shelf which has one effect … inflation, the very thing we’re trying to keep at bay to continue our economic recovery.
So while it’s a nuisance on a personal level that might curtail us from buying more latte’s, on an industrial scale its everything we don’t want and affects the price of goods we buy personally. The sooner this is sorted the better.
An informative source on fuel pricing is if you google ‘BP facts about fuel pricing’. Part 2 next week takes a look at electric vehicle alternatives.
For more in depth on the above go to www.infinance.co.nz/insights.
Written by Brian Coogan, Licensed Financial Advisor and Director at Infinance – Taupo
When you kick a hornet’s nest, it’s the hornets that decide when it’s over – Samantha Forster