Record high petrol prices hitting ‘nearly all businesses’

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Petrol has hit a record high as tensions between Ukraine and Russia mount.

Petrol prices have reached a record high in Australia, with the national average price for unleaded hitting 176.9 cents a litre, according to the Australian Institute of Petroleum (AIP).

The AIP’s weekly report shows a five-point surge from last week, with Western Australia’s average hitting 180.2 cents, the Northern Territory’s hitting 187.6 cents and Tasmania’s hitting 183.8 cents. Melbourne and Hobart are the worst-off cities, where the price exceeds 182 cents a litre for unleaded.

The climbing cost of fuel coincides with building tensions between Russia and neighbouring Ukraine ahead of what US intelligence agencies are calling an imminent invasion. Russia supplies more than 80% of Europe’s gas needs via a pipeline through the heart of Ukraine — and the threat of conflict has sent global crude oil prices to seven-year highs.

Australia’s domestic unleaded petrol price is benchmarked against Singapore Mogas 95 with a current wholesale price of 166.1 cents a litre — but fuel wholesalers and retailers must integrate wharfage, freight, insurance, transport, storage, salaries, rent, power and other utilities into their price. GST and the government’s fuel excise (44.2 cents a litre as of this month) are an additional price burden.

The wholesale price of petrol has already increased a whopping 97% since April 2020 because of successive COVID-19 waves disrupting supply chains worldwide, says Mark McKenzie, Chief Executive Officer of Australasian Convenience and Petroleum Marketers Association (ACPMA).

There was some relief felt at the pump in November and December, but if Russia is “distracted by military conflict” wholesale oil prices — which have already surged 17% in eight weeks — will continue on an upward trajectory, McKenzie warns.

“With Russia producing around 9.8 million barrels of oil a day, compared with Australia at around 350,000, the loss of this production even for a short time would have a significant impact on supply,” he says.

“In short, we are operating in global fuel market territory that is very unfamiliar — that is two years of a global pandemic combined with geopolitical tensions in Europe – and so it is anyone’s guess as to where oil and petrol prices will go from here.”

Skyrocketing petrol prices spells bad news for businesses that rely on transportation to trade, according to Frank Rusitovski, the director of the Australian Mobile Food Vendors Group (AMFVG).

“Our industry has already faced many challenges over the past 24 months that have seen many operators doing their best to keep their wheels on the winding and rocky stretch of road that COVID-19 has brought about,” he says.

“However, we now have seen a shift of focus from vendors to petrol prices with vendors considering the cost of running generators to power their operations as well as fuel required to get to their trading destination prior to committing to any location or trading opportunities.”

Rusitovski says AMFVG is looking into different options to ease the pressure for strangled members, including fuel loyalty programs or even alternative power sources that will both reduce costs and support the environment.

“We are currently reviewing the suitability of an all-electric battery-powered vehicle that offers zero exhaust pipe emissions which can be utilised as a food truck,” he says.

“Although there is still some work to do, we are seeing some light at the end of the tunnel.”

And it’s not just the mobile vendors feeling the pressure — the ripple effect of rising petrol costs affects nearly all Australian businesses, according to Alexi Boyd, the chief executive of the Council of Small Businesses of Australia (COSBOA).

“Logistics affects nearly all businesses through freight and supply delivery and even through the knock-on effects of a service delivery partner, for instance,” Boyd says.

“There’s a reason why inflation is affected by fuel prices regardless of whether you’re selling goods or services.”

Boyd says business owners are already grappling with the bottlenecked supply chain — “one of the top three issues affecting businesses”, she says — and climbing petrol prices can exacerbate things.

“However, fluctuating petrol prices is nothing new for small businesses, many of which are well organised and savvy about working fluctuation into their costs,” she adds.

And the consumer is set to feel the pinch too, with rising fuel prices correlating with rising costs for petroleum products and just about anything that requires transportation.

“Any input costs into products and services will ultimately affect the cost for the consumer,” Boyd says.

“That’s the normal price of doing business.”

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