As 2022 dawned and the long shadow of COVID looked like it might finally start to recede, many Australians dared to hope that life was returning to normal, or at least something approaching it.

The country boasted one of the highest vaccination rates against the virus anywhere in the world, and from coast to coast there was talk of opening back up and removing pandemic-era restrictions.

Yet barely 10 weeks into the new year and those hopes are fading fast, as turmoil in Europe sends shockwaves crashing through global energy markets and Australia’s economy.

And industry groups are warning that consumers who are already battling surging costs are set to face more pain as the price of everything from food, flights and the weekend drive soar.

The source of so much of the discomfort is oil.

Oil prices touch everything

Relatively high at the beginning of the year, the price of oil shot up to near-record levels on the back of Russia’s invasion of Ukraine.

While the most obvious effect of a surging oil price can be seen at the petrol bowser, observers note it flows through to almost everything a person can find on a shelf.

And it’s for that reason that economists, including the top minds at the Reserve Bank, are on edge about the potential for oil to fuel runaway inflation not seen in decades.

Rising oil prices are felt most keenly at the petrol pump.(ABC News: Che Chorley)

The RAC, a WA-based motoring insurer, said it was too early to say whether oil prices would stay elevated for long, but acknowledged the early signs were not good.

Alex Forrest, the RAC’s vehicles and fuels manager, said extra costs to households would quickly add up unless the oil price returned to its lower, longer-term average.

He said analysis by the insurer showed motorists would pay an extra $670 a year compared with 2021 in fuel costs if petrol prices stayed at $2 per litre.

This rose to $908 a year if prices remained at $2.20/L and $1,150 if prices averaged $2.40/L — a level recorded in recent days across parts of Australia.

Household budgets to suffer

One way or another, he said petrol prices above $2/L would hurt household budgets.

“We’ve had feedback from our members … and about a quarter of them have said they would struggle to fill up their cars financially with petrol at $2 a litre,” Mr Forrest said.

“With that being well exceeded now in recent days, you can only expect that more than a quarter of motorists will be struggling to put fuel in their car.

“Households are having to find that money elsewhere now if they are looking to get around the same way they have.”

There are estimates that more than a quarter of motorists will struggle to fill up.(ABC News: Gian De Poloni)

Elsewhere on the roads, the national body representing trucking businesses warned that many operators were already on the brink even before the oil price shock.

Warren Clark, the chief executive of the National Road Transport Association, said the situation was threatening to bring many to their knees.

“I would say some of them are parking up their trucks because they just go, ‘I can’t pass that on, I’m not going to do the job and lose money on it’,” Mr Clark said.

“We know that 99 per cent of our calls over the last week — and we’ve had over 500 calls — have been around the cost of fuel.

Efforts to freeze Russia out of the global economy have put a rocket under oil prices.(Reuters: Sergei Karpukhin)

Trucking operators on the brink

Australian trucking businesses typically turned a profit of just 2.5 per cent and often had little capacity to immediately pass on cost increases, Mr Clark said.

There were between 60,000 and 70,000 such businesses — often owning multiple trucks — across the country.

Mr Clark said many of those were small, family-owned businesses that had been hit with a 100 per cent increase in their fuel prices, which already made up almost a third of their costs.

He said any operator in the red would be hanging on until they could pass on the extra costs to their customers, but there was a risk a big number would be unable to last that long.

Either way, he said, consumers would have to pay more because “at some stage, something is on a truck to get to your supermarket or your pharmacy”.

“There’s talk of coffee going to $7 because of freight. This is how far it goes through,” Mr Clark said.

Higher transport costs are tipped to bump up the price of a cup of coffee.(ABC News: Alkira Reinfrank )

Jetsetting dreams take a hit

The comments come after predictions by Alan Joyce, the head of Qantas, that airfares would have to rise if the price of oil remained high.

Speaking earlier this month as war raged between Ukraine and Russia, one of the world’s biggest oil producers, Mr Joyce said ticket prices would need to increase 7 per cent if oil stayed at $US120 a barrel.

Prices for Brent crude, the global oil benchmark, touched $US139 a barrel at one stage but have since fallen back below $US100 on hopes of a negotiated settlement between Russia and Ukraine.

Mr Joyce noted that Qantas had hedging contracts in place to offset movements in the price of oil but these would expire from the middle of the year.

Australians’ appetite to fly to places like Bali could take a hit as airfares surge.(Foreign Correspondent: Matt Davis)

“Now unfortunately, if [oil prices] stay at these levels, airfares are going to have to go up and we’re going to have to pass them on,” he said at the time.

Motorists ‘looking sideways’ at EVs

Alex Forrest from the RAC said it was possible people would keep their car in the garage to shield themselves from the fuel price pain.

He said there were already anecdotal reports of motorists “finding ways to drive less or shop around for cheaper fuel more regularly”.

And while he said the savings might not seem “significant … they might help pay half a bill over a year, and every bit counts”.

Longer term, he said the high price of fuel was likely to fast-track the adoption of electric vehicles by consumers keen to avoid the risks of a volatile and foreign-controlled oil market.

Oil is an essential ingredient in developed economies such as Australia’s.(AP: Eric Gay)

“More than half of our members have said they would consider buying … an electric or a hybrid vehicle for their next car.

“Even though the numbers might not quite add up just yet, it’s already got people looking sideways.

“People are saying, ‘Maybe I don’t want to be powering my vehicle or having its costs at the whim of the world oil price and petrol retailers’.

“That would certainly give them a bit more certainty.”

Extracted in full from: Record fuel prices to usher in ‘unaffordable’ petrol, $7 coffees and costlier holidays, industry warns – ABC News