Three facts of modern life, Death, Taxes & Increasing Petrol Prices

2022-03-16
Get a head start on thinking about how $3 a litre will affect your family & business Get a head start on thinking about how $3 a litre will affect your family & business

What does life look like when petrol hits $3 per litre?

The latest financial stressor for families and businesses as we face down the new normal this year is runaway petrol and fuel prices.

But this recent price rise at the petrol bowser might have a very different long term effect for us all.

Jump Ahead

Usually, petrol price creep has been managed by changing the day you might purchase fuel in the price cycle or even using a petrol price finder app on your smartphone to find the lowest cost close to you.

  • But how do you adapt to a price jump to $3 per litre?

It starts with fuel prices

Financially speaking, inflation is the next challenge on the horizon for us all to prepare for - where costs are rising at 5-8 per cent - and as a result, the only way for fuel pricing is up.

This year a major Australian accounting body has begun advising its members to start proactive conversations with their small business clients and begin modelling the effects of facing sustained fuel price increases in business cash flow projections, where petrol went as high as $3.00 from its current level of around $2.20 for Unleaded.

What would a $3-a-litre-for-petrol world look like for you and your family, your small business and your suppliers?

The effect on the pricing of many goods and services

The rate of the fuel price increases expected would see most small businesses not be able to absorb those increased costs and will need to adjust cash flow forecasts to pass on that increased cost to their customers accordingly.

The effect on everyday family spending

This same flow on effect will undoubtedly roll over into everyday family life as $3 per litre of petrol not only affects the family budget but increases the base costs of all goods and services that have freight as part of their supply chain costs.

  • Petrol price creep will impact all goods and services from Uber eats delivery through to major grocery chains or simply calling out a tradie to fix your sink - and everything in between that has a freighting cost in its supply chain.
  • Businesses who rely upon discretionary spending will find fewer people travelling and therefore fewer daily coffee purchases and associated unplanned buying behaviours.
  • Families taking the kids to the movies will need to reconsider if it's cheaper (and easier) to purchase the recent release movie for home viewing as an alternative, and those families who have a company supplied vehicle, compared to those who don't, will no doubt need to reappraise the value of their employer’s fringe benefits.

It's time to get a head start and think through how your family will deal with the new petrol price hikes on the horizon and the flow on cost of inflation ahead.

  • Regardless of your own view of rising petrol price volatility, remember we are at the mercy of the market and global supply instability.
  • Australia’s geography also means many fuel consumers will have little option but to accept higher prices, feeding an inflation cycle that will increase everything from rents to wages.
When I talk to accountants, they don’t challenge $3 a litre conversation but when I talk to some small businesses, they nervously like to insist ‘it's never going to get to $3 a litre for petrol'Drew Browne

The best way to be prepared for tomorrow is to start thinking about it today.

So what would life look like for you, your family and your business if $3 per litre for petrol litre for petrol was on your horizon?

Contact us today and see if we're the type of people you'd like to work with.

Drew Browne

Drew specialises in helping people protect and provide for what matters most in their lives. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His company Sapience Financial is committed to using business solutions for good in the community, and in 2015 certified as a B Corp. In 2017 Drew was recognised in the inaugural Australian Businesses of Tomorrow National Awards. Drew writes for successful Small Business Owners and Entrepreneurs, his blogs can be read on Amazon.com and you can connect with him on LinkedIn.

Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.

drew browne pic

Drew Browne

Sapience Founder & Director.
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