Soaring petrol costs, high interest rates, rising unemployment and an impending global recession. It's not the best time to be trying to make a living. But wait, it gets worse. Naysayers predict that this is not the end of it and that fuel costs will only move in one direction, which is up. This, despite a huge public outcry over the flammable issue of petrol prices.

It's a complicated and somewhat explosive issue which has caught a lot of media attention lately. Rising fuel costs affect everyone, and when this is coupled with growing unemployment, it makes for a lethal mix.

The problem is a complex one. Australia imports about 15-20% of its petrol to meet its demand of fuel. Most of this is imported from Singapore, one of the world's largest fuel refining and distribution centers. Thus, the wholesale price of fuel - petrol as well as diesel, called the Terminal Gate Price, or TGP - is tied to those in Singapore, where fuel prices were raised some time ago. This is the cause of the recent increase in Australian fuel prices, though it is not the only reason. Fuel prices have, in a post-Iraq-war and a post-Libyan-conflict world, risen everywhere and are here to stay.

Such an increase usually has a snowball effect on everything else. When you have to shell out more for fuel, you cut corners in other places, which affects consumer spending and eventually the economy. So, the question then is: what are the cost drivers?

Partly, the problem is a global one, and, at a very basic level, a simple one - of demand and supply. Consumption around the world has risen immensely, especially with the developing, and overpopulated, countries adding to the demand. Supply, which is mostly concentrated in one part of the world, which is the Gulf, has been dwindling, especially after Libya and Syria have gone through the recent internal turmoil.

Apart from being affected by the international market, the other factor that influences fuel price is Australian Dollar's value in relation to the US Dollar. This is because the international benchmark prices for fuel are done in US Dollars, so, changes in the Australian Dollar as against the US Dollar have a direct affect on fuel prices in the country.

One year that will be remembered as a year of high petrol prices, not only in Australia, but world over, is 2008. A predictable victim of this agonizing increase was the airline industry as many airlines the world over went under. Now Qantas is planning on cutting jobs after seeing its profits plummet to alarming levels in 2011.

Also, back in 2008, when fuel prices rose here sharply, another thing happened. The Westpac-Melbourne Institute consumer sentiment index fell by 5% and this was linked, by many economists, to the rise in fuel price. Four years later, there are disturbing signs of resemblance to that grim scenario, though it is not quite as bad, yet. The consumer index fell again by 5%, to 96.1 points, between February and March this year as petrol price rose by 3% between this very period.

Bill Evans, Westpac's chief economist, expressed his disappointment at this slump under the 100 point mark and named rising fuel prices as a reason for this fall.

The next few months are not going to be better. 2008 is not a year many may want to remember, but the question is, with fuel prices soaring, is it where 2012 is heading?

No one can really answer that question, but, if it's any consolation Australians should take solace in the fact that even with the recent rise in petrol prices, they pay amongst the least, as compared to the other OECD nations, for their fuel, thanks to comparatively lower fuel taxes.