Dollars drained from wallets
Continuing hikes are siphoning money out of consumers’ wallets, claims New Zealand economist
Higher fuel charges could soon push up the price of nearly all retail goods and are already putting trucking companies under pressure, industry spokesmen said.
Brent crude oil prices last week hit a four-year high of US$86.74 a barrel and the impact of that has been made worse by a near US$10c decline in the New Zealand dollar since the start of the year.
Additional Government excise charges and an Auckland-only fuel tax have also had an impact.
Independent economist Cameron Bagrie said rising petrol prices are “siphoning money out of consumers’ wallets and adding to distribution and transport costs”.
“It’s a losing trifecta at the pump with a combination of rising international oil prices, a lower dollar and lifts in fuel taxes,” Bagrie said.
“The economy is still fossil-fuel reliant. Higher fossil fuel costs dent profitability.”
Ken Shirley, chief executive of the Road Transport Forum, said transport operators were already feeling the pinch, as would retailers facing higher freight costs.
“It has had a significant effect on our members,” Shirley said.
“Obviously, fuel is a significant proportion of expenses for transport operators — 15 to 20 per cent of operating costs,” Shirley, a former Labour member of Parliament, said.
“That has to go to the bottom line.”
Shirley said freight rates would soon need to be adjusted upward.
“It’s a fiercely competitive industry — there is no ability to absorb these costs — and of course the whole business is based on transport fuels.”
The forum estimates that the road transport component represents about 12 to 15 per cent of the retail price of nearly all goods.
“It’s a tough, competitive business, and we tend to be price takers with very narrow margins, so it highlights the inability of our members to absorb higher fuel costs — they have to be passed on to freight rates and thereby to the consumer,” he said. “So I think that we can expect to see the price of most goods to go up,” he said.
Dennis Robertson, chief executive of the Road Transport Association, said trucking firms needed to add a fuel price adjustment to their contracts.
“If it’s not passed on, then it puts them at risk in terms of their business,” he said.
The association estimates that its members’ fuel costs have risen by 7 per cent since June.
“What tends to happen is that people get locked into contracts,” he said.
“It’s a very competitive environment out there and in many cases they (transport firms) do not want to keep changing the contract price,” he said.
“A lot of people are coming to us and asking how they can build in their adjustments because at this stage it appears that fuel prices are going to keep going up,” he
said.
It’s a fiercely competitive industry — there is no ability to absorb these costs — and of course the whole business is based on transport fuels. Ken Shirley (left)