As fuel prices rise to record highs, governments look for solutions. Retail petrol and diesel prices marked record highs in many countries across the world, including Brazil and France, which are considering elevating subsidies or cutting taxes to protect consumers from the financial strain.
The moves reflect the economic and political risks governments see in the current energy spike, which has been driven by a rebound in fuel demand since the darkest days of the coronavirus pandemic and supply disruptions in the wake of Russia's invasion of Ukraine. Analysts expect prices to keep rising, which will have a drastic impact on economic growth, forcing lower consumption, affecting workers, and sometimes triggering political unrest. In past years, rising fuel prices have caused deadly protests in countries including Kazakhstan, Iran, and Zimbabwe.
Adrià Morron Salmeron, a Spanish lead economist at Caixa Bank Barcelona, says that the impact of higher oil prices on global growth usually depends on two elements: the factors responsible for the movement (supply, demand, or others) and the balance between the positive impact on oil-exporting economies and the negative impact on importers of crude oil. In the current situation, the issue is that Russia is one of the biggest exporters of oil, and with its international sanctions to try to stop the war in Ukraine, the exchanges with the country have stopped. Analysts at JP Morgan Chase & Co and Bank of America have predicted disruptions to Russian oil flows could push oil prices to $185 to $200 per barrel.
Where are petrol prices rising?
The oil crisis is globally, first beaten by the pandemic; the market has been again suffering from the war and its escalation of prices to the increasing demand and lack of offer. In the United States, the average price for petrol had already reached a record $4.3 per gallon in the first week of March this year. Pump prices could rise to around $5 per gallon in time for the Memorial Day holiday in late May when the country's summer driving season begins to ramp up, said John Kilduff, partner at Again Capital in New York.
In Britain, the average price of unleaded petrol at the pump rose to 1.58 pounds sterling per litre, while diesel hit 1.65 pounds per litre, both record highs, data from automotive services firm RAC unit Fuel Watch showed. Australia's gasoline prices are also at record highs, just under A$2 per litre. Ireland said last Wednesday it will cut the excise duty on petrol and diesel until the end of August to ease the burden of rapidly increasing gasoline prices. Portugal will also lower the special tax levied on fuels from Friday to tackle an unprecedented spike in energy prices.
In France, ahead of the presidential election, President Emmanuel Macron said his government would introduce measures to help households dealing with high fuel prices and pointed out it had already spent 20 billion euros a year to moderate gasoline and power costs. "I won't let anyone say the government hasn't done anything,” Macron said during a campaign event at the begging of March. Brazil's government is also considering a new diesel and gasoline subsidy programme to help consumers. The Czech government will scrap the mandatory blending of bio-components into fuels and abolish a road tax to counter soaring prices.
How is this affecting expats?
The rise in petrol prices has a direct impact on expats who work as drivers; therefore they are considering ways to cut other expenses to afford to pay for fuel. Miranda Krauss, 43, reported to Reuters that she drove to Costco (COST.O) in Carlsbad, California, from the city of Encinitas, 20 minutes away, to take advantage of the bulk discounter's lower gasoline prices. "It's gotten so bad I came all the way here for gas. I normally wouldn't come up this far," Krauss said. Renata Lopez, a Peruvian expat who works in Texas fixing cars hit by a hailstorm (gold hammer), shares how the petrol price has impacted her job. “Although it's the season of hailstorm, people aren't considering fixing their cars (aesthetically) a priority, they have to go to work, and that costs more money now.”
Where there is little impact on oil prices?
In the Russian-Ukrainian conflict, countries that were once part of the Soviet Union, including Belarus, Armenia, Kazakhstan, Kyrgyzstan, and Kyrgyzstan, are standing by Russia. Also extending its support to Putin was Cuba, a close ally of the Russians. Due to its good relations with the Russian Federation and Ukraine, India has also maintained a neutral position as a non-aligned state. All these countries, together with China, which is aiming to take diplomatic measures and strike a balance between western countries and Russia, have been not as impacted as the rest of the world in terms of petrol prices. These countries have openly supported Russia in this conflict and have been continuing to have economic trades. However, since 2017 with the global petrol crisis and also due to Covid-19 pandemic, oil and gas prices have increased.
