What does life look like if petrol hits $3 per litre?
The latest financial stressor for families and businesses as we face the new normal in 2022 is runaway fuel prices.
But this recent price rise at the petrol bowser might have a very different long term effect for us all.
Read in this article:
What does life look like when petrol hits $3 per litre?
The latest financial stressor for families and businesses as we face the new normal this year is runaway petrol and fuel prices.
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.
- This recent price rise at the petrol bowser might have a very different long term effect for us all.
How will you adapt to a price jump to $3 per litre?
How do you adapt to a price jump to $3 per litre?
Temporary Relief by halving fuel excise: From 12.01am on 30 March 2022, the excise and excise equivalent customs duty (excise) rates for petrol, diesel and all other fuel and petroleum-based products, except aviation fuels, will be halved for 6 months. For petrol and diesel, the rates will be reduced from 44.2 cents to 22.1 cents per litre. Budget 2022-23. The current fuel excise cut is set to expire in late September 2022
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 prefer 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 was on your horizon?
Call us today on 1300 137 403 or email us here for a no-obligation private chat about your situation.
Drew Browne is a specialty Financial Risk Advisor working with Small Business Owners & their Families, Dual Income Professional Couples, and diverse families. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His business Sapience Financial Group is committed to using business solutions for good in the community. In 2015 he was certified as a B Corp., and in 2017 was recognised in the inaugural Australian National Businesses of Tomorrow Awards. Today he advises Small Business Owners and their families, on how to protect themselves, from their businesses. He writes for successful Small Business Owners and Industry publications. You can read his Modern Small Business Leadership Blog here. 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.
