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There is a cold winter ahead

It appears as if the price of petrol is set to soar even higher than it already has.

The effects of Putin's invasion of Ukraine and Western boycotts on the oil Russia exports have already pushed the crude price above US$130 per barrel, the highest price the world has seen in quite some time.

It may only be weeks or even days before NZ's pump price for 91 fuel crashes through the $3/litre barrier and beyond.

If you're the owner of a shiny new EV or even a PHEV, you must be smiling all the way to the bank right now.

If you've just bought a big, dirty V8 Holden from the past decade -- not so much.

However, it's not just fuel prices that are headed to the heavens...

Yesterday the Commerce Commission (CC) rolled out the result of its investigation into the supermarket industry. More importantly, it also rolled out the measures it believes will address the very serious issues that have, for decades, effectively strangled any hope at a competitive marketplace.

And the nation was underwhelmed.

Although they ordered some changes surrounding caveats on property/lease titles, nothing really significant is being done to address the root cause of the problems that have seen New Zealand's grocery prices become amongst the most expensive in the world (in relation to income).

It would appear that there is a perfect storm brewing right now and it could cause massive problems for everyone but the high-income earners out there.

Prices are rising across the board. Fuel, electricity, food, interest rates, building costs, etc. All of this comes at a time when wages and salaries remain pretty much static.

There are a raft of factors at play here, some of them glaringly obvious but not yet having an impact. For example, a great deal of NZ's wheat harvest was damaged by recent flooding. That alone will see a spike in many staples such as bread.

International dairy prices have skyrocketed to new highs, something that will shortly flow on to domestic prices because, as we're constantly told, we must match the price being paid by the global marketplace.

There are calls for government to relax GST as a way of helping buffer the impact of all these actual and looming price rises -- but they can't. The government has already spent massive amounts compensating Kiwis for lost income during the Covid crisis as well as a huge vaccination program that remains ongoing.

It is in the government's own interest for prices to continue rising, as this not only significantly hikes the amount of GST they collect but the inflation involved also creates a significant degree of quantative easing that reduces the effective debt levels it faces.

So what about Kevin "average" Kiwi? What's he supposed to do?

Well sorry Kev but your stuffed mate.

Your wages won't go up by any significant amount but you'll be paying twice as much interest on that million-dollar mortgage within the next 12 months. Even the cost of just getting to work will rise very significantly and putting bread on the table will become a real mission.

I suspect, given the levels of borrowing that have been taken on by many who are just getting onto the property ladder, quite a few good honest Kiwis will find themselves unable to meet their monthly outgoings and we could end up with more than a handful of those facing mortgagee sales with negative equity as the outcome. Even once they've lost their hard-won homes, they'll still owe the banks tens or hundreds of thousands of dollars.

Of course it's not just New Zealand facing these challenges, it's most of the Western World.

With this in mind, I worry that as governments come under increasing pressure to "do something" to put things right, they may decide to unify their population and divert their attention by way of war. Yes, nothing unifies a people or solidifies a government's support than a good old war.

With Putin providing the perfect theatre for such a "government-saving" distraction, things could get worryingly hot over the next 12-18 months. I would not be surprised if we see the West wade in (boots and all) if Russia turns off gas supplies to Europe.

Grab your popcorn folks (if you can afford it). We're in for a bumpy ride!

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