The real solution to rising oil costs and what it might mean for your back pocket

by Verve

When it comes to oil, we much prefer to focus on diverting our money far, far away from it. But the reality is that our over-reliance on this destructive energy source is leading to economic instability, globally. So it’s important we know what’s really going on and what the solutions may be.

The price of oil is what’s making headlines: after oil hit its highest price in years, at $80 per barrel. There is a myriad of factors that impact oil prices. In this case, it’s largely due to increased demand as the global economy’s cogs begin to turn after prolonged periods of lockdown. Supply issues are also contributing to the hike, as (ironically) natural disasters such as hurricanes in the Gulf of Mexico, are disrupting oil extraction and therefore impacting supply

The global pandemic had caused oil prices to drop dramatically last year, as planes stayed grounded and the majority of the workforce went remote.

On Monday, October 18th, the cost of US crude oil increased by 2% – landing at a seven-year high. In the last year alone, the cost has increased by more than 120%.

It’ll cost more to fill up your car with fuel

If you’re among the 92% of Australians that drive, you’re expected to feel the impact when you next stop for fuel. Unfortunately, experts have warned that the increasing petrol prices are only set to continue. 

The result is less disposable income for Australians 

With more of our money being spent on petrol, our disposable income decreases. The impact on the local economy can be significant, as the amount we spend on non-essential goods drops. This is especially true for states coming out of lockdown, as the workforce returns to the office and the need for fuel to commute increases.

Shipping gets more expensive for businesses

When oil prices rise, the increased cost of fuel is often passed onto businesses. This impacts any business, large or small, that ships goods by plane, road, or sea. So, essentially any mode of transport. 

Consumers become more hesitant to spend

Any sudden change in the global economy tends to spark nervousness in consumer spending. While oil prices remain unsteady or continue to increase, it’s common for people to be more reserved with their spending. This isn’t a major issue for consumers, but it can impact businesses and throw out the supply chains. 

Women are among the hardest hit

Hospitality and service industries are hardest hit when consumer spending decreases. And with women making up the majority of the workforce in those industries, we know they’ll feel the brunt of the issue. That’s not all – as women make up the majority of unpaid carers, the stress and worry that’s caused by financial concerns can weigh just as heavily. 

So, what are we waiting for…

The solution? We need to stop waiting for petrol prices to go down. We need to end our reliance on this destructive energy source and switch to electric vehicles. 

While drivers in the EU have been quick to hop into the electric driving seat, Aussies have lacked government incentives. It’s actually proved tricky to navigate the various stamp duty exemptions and tax charges that apply, as they differ between states. The upfront cost of electric cars has also been a barrier to entry for Aussie drivers, though more affordable models are now entering the market. When considering the annual running costs, though, electric vehicles are the more affordable option.

The benefit electric cars have on our environment is much clearer to see. Recent research showed that in 95% of the world, driving an electric car is better for the environment than driving a gas-powered car. They’ve been proven to emit less greenhouse gases and air pollutants. For example, just one electric car is said to save 1.5 million grams of C02 on average over a year.

Although research continues into how to optimise electric vehicles to be built in the most eco-friendly way, the positive impact of switching to electric is undeniable. 

A friendly reminder that all the financial information contained in this blog is general and doesn’t take into account your personal financial objectives, situation, or needs. It’s important to do your own research and consider getting in touch with a professional adviser to access specific advice tailored to your unique situation. When considering if Verve Super is appropriate for you, please read the PDS and TMD available on our website.

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