Journalist and publisher of the Kākā, Bernard Hickey, told the Front Page that a lot of people were hopeful that this would be a short-term blip.
“A bit like the Russian invasion of Ukraine in 2022, where prices shot up for about a month, maybe two months, and then they started to come down.
“Well, we are into the third month now, and all of the noise we are hearing from the Strait of Hormuz is that Donald Trump is in for the long term. The Iranians are definitely in for the long term.
“If that’s the case, that will create more damage in the stream of oil and products downstream and also upstream, because every time you have to turn off one of these wells, you actually destroy future production.
“ To do anything really that’s used in the retail economy, and it’s gonna flow through into all sorts of prices.
“So you get a double whammy. Not only do you have to pay more to fill up your tank. But then, when you buy something from someone else, they’ve added a surcharge on as well,” he said.
Firms have run into the precarious position of having to determine how, and whether, to pass on the rise in fuel costs to customers.
Hickey said there are interesting ways that companies can pass on these costs without taking blame.
“There’s some really interesting behavioural finance going on … this is the psychology of pricing.
“ Who should pay? Should it be the consumer, the company, or the government? And at the moment, the surcharge language is being used to layer on a cost directly to the consumer with the expectation that the firm that’s doing it won’t get blamed and that, in theory, it’ll go away soon.
“That will be the interesting thing. We need to go back to people in two or three months and ask if the surcharge has gone away yet.
“At some point, the surcharge thing becomes a bit of a wheeze, and we’ll have to revisit it, because a bit like the credit/debit card/payWave problem; it’s sneaky.
“This idea that the prices of things you can rely on, that they’re gonna be there the next day and the day after that, that’s gone. And so when you get these little add-ons and nips and tucks and little scratchy bits of paper stuck on machines saying there’s a surcharge, you get very grumpy,” he said.
Listen to the full episode to hear more about:
Effects on SMEsFuel surchargesSludge economicsHow oil markets are like Wile E. Coyote.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5pm. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.