too much of a good thing

With oil reaching $130 per barrel, there is much exitement and banter with regards to producing, and speculative oil companies, and rightly so. But at what point does a high oil price actually prove to be a disadvantage? heres my point.

Take an average wage earner lets say at around 25 years old, and say they earn $40K: this equals $630 per week.

Lets say they work 40 minutes from the city and drive into work every day. thus costing about $50 per week in petrol. They pay rent say at about $150pw, and have the usual Credit Card and Utility repayments to make, so lets say that makes another $75 pa and geneal living and entertainment at $100pw- So we have the following

Income = $630pw
Less
Fuel $50
Rent $150
Loan Repayments $75
General living $100

Surplus $255

- Anyway, the above budget is mine from some years back. Now lets see how this looks for a $40K incoe earner today

Income = $630pw
Less Fuel $100 + pw
Rent $325pw
Loan Repayments $100pw (thanks interest rate rises)
General living $150 (thanks inflation)

Deficiet $-45

What is the catalyst for the change? our favourite commodity at CVI of Course oil.

the cost of oil feeds into everything we do, from the fuel we put into the car, to canvas t4p wants to paint on, to keyboard im currently typing on. when fuel goes up the knockon effect is very frightening, inflation skyrockets

In Australia the reserve bank feels it must act with the only tool it has at its disposal (interest rate increases)which inevitably flow on to property investors, which then flow on to increased rents. At some point that poor fellow on 40K is going to want a pay rise. Which will scare the reserve bank some more so they will have to raise the cash rate again, and so the cycle goes.

So how does this relate to CVI? well CVI at $1.00 will make many here quite well off, but if it takes $250 a barrell to get there, then the social and economic consequences of such an event might eclipse the money in our trading accounts.