Soaring oil cost will hurt us all

Soaring fuel prices stoked by the southern United States hurricane disaster threaten to squeeze most aspects of economic life between now and Christmas, leaving few New Zealanders unscathed.

Shopkeepers say fierce competition for customers' dollars - already dwindling because of the ever-climbing cost of filling up the family car - has left them struggling to resist price rises for groceries and other necessities of life.

But with some analysts fearing oil prices may rise to more than US$100 ($141) a barrel if the industry is hit by another crisis of the scale of Hurricane Katrina, the Retailers Association says it will be "impossible" for shops to hold out much longer.

How oil prices will affect you:

* Immediate impact: Economists estimate every $1 rise in the landed cost of a barrel of refined petrol in New Zealand means 1c more a litre at the pumps. That refined cost stood close to $127 a barrel yesterday, a $15 rise since Monday, suggesting this week's 5c retail fuel price increase may be leapfrogged within days.

* Inflation: Fuel costs have a double-whammy effect on inflation.

They initially account for more than 3 per cent of the consumer price index as a direct and immediate impact. Over about a year they double that impact as they flow through the rest of the economy into higher freight charges and feedstock.

* Groceries: Though prices are generally holding at the moment, Westpac chief economist Brendan O'Donovan says it is only a matter of time before the petrol increases flow through to supermarket shelves.

"Everything we buy is transported around the country."

* Dairy products: Fonterra says it has yet to raise prices of milk and related products, but is keeping these under continual review as its tankers and other vehicles notch up 70 million kilometres a year.

* Plastic products: Plastics are oil products present in almost every manufactured article in homes and workplaces - such as fridges, televisions, phones and pens - or in packaging. All the raw materials of plastics, or polymers, are imported and cost about 25 per cent more than 18 months ago. Manufacturers say they have tried to absorb costs until now, but Auckland importer David Brittain said a Singapore agent yesterday warned of a likely 10 per cent increase by the end of next month.

* Clothing: Prices of high-end imported clothing are likely to rise, but this will be offset by cheaper imports from China.

* Postage: New Zealand Post is avoiding lifting postal charges, but has its courier rates under review.

* Taxis and buses: Average taxi fares are up about 40c a kilometre to $2.35, forcing elderly and disabled passengers to cut back. Bus users have yet to feel it, but Stagecoach Auckland said the diesel price could force a ticket price increase.

* Air travel: Air New Zealand and Qantas lifted fuel surcharges this week, by an average $6 on domestic routes and more internationally.

* Households: Denise Smith of Papakura Budget Service said her organisation was having trouble persuading families on tight budgets to consider cutting costs by switching to public transport or car-pooling.

* Freight: Some transport companies have raised their prices between 8 and 10 per cent this week, partly as a delayed catch-up on an accumulated 30 per cent rise in diesel prices in the past 12 months.

* Students: Auckland University Students Association president Greg Langton said bus fares were still too high in many areas to deter members from leaving cars at home, but public transport was becoming more attractive. He also said students were cutting back on food before transport, and that visits to his association's foodbank had increased by about 20 per cent this year.

* Workers: Engineering, Printing and Manufacturing Union secretary Andrew Little said high fuel prices were prompting many workers to reconsider whether the union's 5 per cent "fair share" campaign was ambitious enough.