The price of crude oil has risen sharply. It will increase the cost of living, joining a range of other unavoidable purchases. For households on lower incomes, the weekly budget just got much harder.
It is a good time to look closely at household budgets and seek help if the budget doesn’t balance.
- International crude oil prices have risen sharply.
- Global demand is still rising.
- Supply is increasing, but not fast.
- Sanctions on Iran could disrupt supply.
It is a mixed bag to say the least.
Rising oil prices, a falling exchange rate and rising taxes have increase the cost of fuelling up. This will affect households and businesses. Transport is deeply embedded in our economy.
Transport is also a necessity, rather than a luxury. When fuel prices increase it is hard to avoid. So the money spent on fuelling up increases, and other spending on nice-to-haves falls.
The price increases can also take a while to come through.
The cost at the pump increases quickly, but the cost of freight often take time.
This means that rising transport costs take a while to come through to the things we buy at the shops.
The increase in fuel prices joins the likes of rent, home ownership, rates, insurance, fruits and vegetables. They have risen faster than incomes in recent years.
Even though there are more jobs, and firms are finding it hard to recruit labour, wages have been rising at a modest pace.
There has been an uneasy truce.
Many businesses are finding it difficult to increase prices and keeping wage costs under control has been critical to ensure profitability and sustainability of businesses.
Rising oil prices, a falling exchange rate and rising taxes have increase the cost of fuelling up. For households on lower incomes, the weekly budget just got much harder.
Increasing cost of necessities is squeezing households hard.
With wage increases harder to come by, many are working longer hours to make ends meet. A sudden increase in fuel prices makes it even harder.
The impact is inevitably largest on low income households, because they have so little discretion in their weekly budget.
An increase in the cost of necessities like rent and fuel can mean sacrificing on the groceries, or delaying purchasing clothes or even modest treats. Continue reading
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- Shamubeel Eaqub is an experienced economist who makes economics easy. He is also an author, media commentator and a thought leading public speaker.