Oil has crossed $100 a barrel again. That is bad news for anyone who drives a car, but it is also a warning to businesses already struggling with rising costs.
Brent crude, the international oil benchmark, rose above $100 on Wednesday as the war between the United States and Iran escalated. Attacks on tankers and renewed disruption to shipping through the Strait of Hormuz have raised fears about the supply of oil to the world.
The question is how long this will last. Nobody seems able to give a convincing answer.
The price at the pump
I was struck the other day by reports of Americans complaining about the price of petrol. And this is so despite American be America being a major oil producer and with much lower taxes on fuel than in South Africa.
It is a reminder that the oil price is not some distant figure on a financial news screen. It follows you to the petrol pump.
If you drive to work, take the children to school, visit family or go shopping, you feel it. If you fly somewhere, you pay for it in the price of your airline ticket.
For business, the effect is even wider. Oil is used in mining, manufacturing, agriculture and transport. It is built into the cost of moving goods, running machinery and getting products to market. When the price rises, the pressure does not stop at the fuel station.
A war with a long bill
The latest escalation has made the situation worse. The United States says it has destroyed five Iranian oil tankers. Iran has responded with attacks on shipping and military targets. The Strait of Hormuz, through which a substantial share of the world’s oil and gas normally passes, has been severely disrupted.
This is the sort of uncertainty that makes oil traders nervous. It is not simply a question of how much oil is being produced. It is whether it can get to the people and businesses that need it.
And then there is the environmental cost.
I saw reports of a large oil tanker sinking after an attack. It made me think about the crude oil that may have entered the sea. The reports have not established the full environmental impact, but the possibility is disturbing.
War has a way of making people think about the immediate damage: the ships, the buildings, the lives lost. The pollution can be harder to see. But it does not disappear because the fighting moves on.
The cost of carrying on
For those of us who depend on petrol or diesel vehicles, the practical response is to cut back where possible.
I have been trying to combine shopping into one or two trips a week. I have also cut back on trips into Cape Town. A journey there and back is expensive these days.
The same applies to businesses. A delivery costs more. A service call costs more. A restaurant has to pay more to get supplies. The customer eventually pays.
No easy way out
The oil price is also a reminder of how exposed the world economy remains to events far beyond its control.
The war has already disrupted oil flows and raised fears of a wider supply shortage. Analysts are warning that prices could rise further if the disruption continues.
The American president’s approach to foreign affairs has added another layer of uncertainty. It is difficult to see where the war ends when the parties remain locked in a cycle of attack and retaliation.
For now, the oil price is telling us what the market thinks: the risks are rising.
Grin and bear it?
Carrying on under these circumstances is very difficult.
When you go to the petrol pump, you pay more. When you go to the supermarket, you pay more. When you buy a drink or eat a meal at a restaurant, you pay more. Restaurants have hiked their prices. Businesses have to recover their costs. And the experts are not even able to predict when the world price will come down.
So what can we do?
For the individual, it is a case of cutting back where possible. Fewer trips. More careful shopping. Perhaps a little less spending on things that can wait.
For business, it means watching costs closely and trying to avoid passing every increase on to the customer.
But there is a limit to how much cutting back can be done.
The oil price is back at $100 a barrel. The war continues. The shipping routes remain uncertain. And the bill is coming our way.
For now, it is a case of grin and bear it.
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