Inflation fears as fuel prices set to rise

2011-01-24 00:00

RISING oil prices are threatening to eat away at your hard-earned income in 2011.

Global oil prices are on the rise and further petrol and diesel price hikes are on the cards in February.

It is also highly unlikely that further interest rate cuts — which have helped consumers to ease their debt burdens — will be announced this year.

Although the rate of price increases of consumer goods declined throughout most of last year, economists and the SA Reserve Bank’s Monetary Policy Committee have expressed concern that higher commodity prices — notably crude oil and various agricultural commodities — are a major threat to inflation.

Some economists even predict that food prices will rise by between six and 10% this year.

Motorists are likely to have to fork out as much as 20 cents a litre more for petrol and diesel from February 2, the first Wednesday of the month, as the under-recovery on petrol and diesel currently amounts to between 21 and 22 cents a litre.

An under-recovery on a fuel product essentially means that consumers are paying too little for a fuel product on that day.

A petrol price hike in February would represent the ninth price hike in the past 14 months and the fifth price hike in a row.

Motorists’ pockets have steadily been squeezed over the past two years. The price of 95 unleaded petrol (coastal) has risen by more than 10% over the past year.

The price of 95 unleaded petrol (coastal) was about R6 in January 2009. The price in January 2010 was about R7,86 and this figure rose to R8,73 in January 2011 — despite various declines between May and October 2010.

Although the strength of the rand has shielded consumers from heftier price hikes, global oil prices continue to rise and now threaten to top $100 per barrel.

The rand has weakened mildly against the United States dollar in recent weeks and some economists predict that this trend will continue in 2011.

The Department of Energy is expected to make an announcement on the February 2011 fuel price changes on Friday.

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