Rising petrol prices - are they a blessing?

The affects of rising petrol costs continue to be felt across the nation. And as if the current rising costs at the pump weren't hurting motorists enough, they can now expect to pay even more - albeit briefly - as the impact of Hurricane Katrina threatens the crude oil producing Gulf of Mexico region, in the USA. But it is important that we consider these affects within a balanced framework. While it is inevitable that petrol price increases will impact on consumers discretionary spending, we must also carefully consider the relevant benefits that abound. According to Mr. Chris Richardson, Director Access Economics, "The impact of petrol price increasing is like a tax ... it effectively cuts disposable income." And as Ms Elizabeth Foley, AXA's Head of Investments says, "Since most households are dependent on their cars regardless of petrol prices - spending in other areas is likely to be squeezed instead. It will lead to some level of substitution i.e. smaller cars, greater use of public transport and altered spending priorities." But contrary to popular opinion rising petrol prices are not all doom and gloom. Mr Richardson said petrol made up only about 4 per cent of the average household's spending. "What's happened to housing prices - good on the way up, and bad since they began stagnating - is rather more relevant for consumers than fuel is." Oil consumption to GDP has declined significantly in G8 countries over the past 30 years since the first 'oil shocks' of the 1970's. As a result, rising prices now have less of an impact than previously. Ms. Foley says, "As Australia is a significant oil producer, there is reason to believe that certain sectors of the economy and regions may benefit substantially. These may include higher tax receipts and dividends from oil producers, together with a higher impetus for sectors that are oil substitutes." Petrol prices must also be seen in the context of other cha