Get ready!

petrol-price-hike

Prices go up often. Prices come down on occasion. But no price causes more angst and worry then that of fuels: petrol/gasoline, diesel, and their like. Why?

Fuel price is subject to the same constraints of supply and demand as any other commodity. Global demand is rising rapidly, while supply is struggling to keep pace. Hence there is going to be an inexorable upwards pressure on fuel prices for the foreseeable future. Those who understand this will make the necessary preparations to get ready for this rise. Those who are caught with their proverbial pants down will trip and fall flat on their face. It may sound callous of me, but that is the way the system works. Raising the price of a commodity increases the incentives to use it more efficiently for the rich and poor alike. Some governments often try to soften the blow for the more vulnerable sections of society by providing subsidies for the cost of fuel since the ripple effect on inflation can be quite substantial. But, increasingly, this has been difficult for governments to sustain, due to the huge amounts of precious foreign exchange that such subsidies can eat up within a few short months. Other governments find heavy taxation of fuel prices to their advantage by providing an easy source of revenue.

So why the angst when it will clearly achieve nothing?

There is a clear need to be ready for rising fuel prices and all the secondary effects that will come with it. Internationally, this increasing competition means that countries with poor economic performance are going to suffer from being shut out of progress and access to resources. Socially, it means that unrest and deteriorating law and order situation are never far away as frictions mount between the have and the have-nots. Personally, it means that everyone needs to look at how they use fuel and cut down its use as much as is possible, or plan to divert more financial resources to afford the levels that they are used to consuming.

Simple, isn’t it?

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