On the minds of most people is the rising, perhaps escalating, cost of fuel over the last year. If you are not a car owner/driver you might not be directly concerned. However, there are indirect cost and inflation of prices of goods that are transported to shops too, these are affecting everyone one way or another. We are seeing it in our retail price inflation numbers each month. Cost of energy (gas or electricity) in your homes and businesses has been rising too, this goes more or less hand in hand with rising cost of crude oil and gas traded in the commodity markets (mostly in city of London, New York, but also in places like Geneva, Amsterdam and Singapore).
The obvious effect of rising fuel costs, is being seen markedly in cost of petrol for cars, lorries and other transport. The cost to the economy is obvious, it’s squeezing the spending power of individuals and businesses meaning that it will also have a knock on effect on the wider UK Economy. Couple that with rising inflation of other prices (food for example) and the recent increase in VAT, our pockets and earnings are being hit from all directions.
There is another danger ahead: if the Bank of England’ interest rate setting committee loses it’s nerve and starts to raise the base rate of interest to try to combat inflation, we will be heading for the second economic crisis of the 21st century because the government is also cutting jobs through public spending cuts. It would be bad if the Bank of England committee lose their nerve, as it’s avoidable because the inflation we are facing is being caused by the actions of government and the already rich commodity traders (those who trade in fuel, food staples etc), not because of an exuberant spending spree by you and me. So despite rising inflation businesses and majority individuals and families are praying that rising fuel costs are not going to be accompanied by rising cost of servicing bank loans and mortgages.
What can be done to curb rise of fuel cost? Well we could hope that the government would threaten traders and retailers who buy and sell the commodity , with a windfall tax in order to curb speculation and rising prices. We could also pray that Chancellor Osborne sees the errors of his way and reverse the VAT rise and freeze future fuel tax until we’re out of economic dire straits.
There are many other reasons and solutions that can be introduced into the argument, that is something for another day and we need to see what happens over the next 2 or 3 months and on budget day in between. It’s possible that the world economy starts looking grim again and as a result of worldwide protests against rising cost of commodities, some poorer countries are suffering very badly, we see coordinated action on depressing costs or see a reversal. But we need a strong government now who can understand the pain this dire inflationary situation is already causing here in the UK and save us from further financial trouble.
