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The potential for a knock-on effect of rising fuel prices to be felt by other industries is becoming more likely, as oil and gas prices continue to rise to an all-time high, companies are finding it hard to maintain their costs and may have to shift this burden to the consumer any day now.
Petrol prices have risen higher and higher this year, as oil makes a comeback in 2021 following a difficult year of pandemic restrictions and low demand.
This has, of course, been aided by the OPEC+ curbs on production that restricted oil output across member states for the first half of 2021.
And while production levels are slowly rising, some countries are finding it difficult to reach new OPEC targets as they revive their oil and gas industries, meaning the global shortage continues.
Looking at the price of gasoline over the last 20 years, you can see that the global average has doubled, from $0.60 a litre in 2001 to $1.20 a litre today.
This year, in particular, the increase in demand as economies open back up following over a year of restrictions, added to a supply shortage across much of the world, means prices are nearing an all-time-high.
And it seems that the trend is not over yet, with experts suggesting that motorists across Europe and Asia can expect high petrol and diesel costs well into the winter months as the Brent benchmark stays around $85 a barrel; demand for fuel increases; and taxes on motor fuel in countries such as India, France and the U.K. continue to stay at around 60 percent of the retail price of petrol and diesel.
As well as rising fuel prices, we are seeing the cost of food and drink increase, with average food prices hitting a decade high and costing around one-third more this September than last.
Fuel costs cannot be blamed as the sole catalyst in rising food prices, as harvests hit by hot weather and Covid-19 restrictions, an increase in global demand – with a dramatically cold 2020 winter and hot 2021 summer, and disruptions in the supply chain, are also to blame.
But if transport and farming costs continue to rise, our food bill is likely to keep climbing.
Essentially, anything that is used on freight transportation and any industry that relies on fuel or petrochemicals will likely be affected by the ongoing hike in oil prices.
And while consumers are worried about petrol and diesel prices at present, this is just the tip of the iceberg.
The hardest hit will, once again, be those living in developing economies that are still struggling to recover from the impact of the pandemic.
With an uneven economic recovery, due to low vaccine rollout figures and Covid restrictions needing to continue across several low-income countries, high fuel prices and the spillover effect on other industries, particularly food, could see governments having to provide economic stimuli to the poorest populations, as well imposing price caps on fuel.
One thing’s for certain, it’s going to get worse before it gets better. Those working in agriculture and industry are already taking the hit and it’s only a matter of time until this price burden is shifted to the consumer, not only at the pump but across a multitude of areas of our daily lives. – Oilprice.com
Online Reporter