Latest fuel price rises a blow for economy

2011-05-03 00:00

THE ripple effects of of the latest petrol price hike on businesses and individual consumers, which amounts to 29 cents a litre, will affect the wider economy deeply.

The hike, which will take effect tomorrow, will lift the price of 95 unleaded petrol on the coast to R9,95 a litre — a tad under the R10 a litre financial pain barrier.

It will take motorists back to the dark days of July 2008, when record crude oil prices sent the petrol price soaring to R10,40 a litre (95 unleaded coastal).

The latest increase amounts to a 17,3% year-on-year increase and it is worth noting that consumers paid just R5,76 for petrol (95 unleaded coastal) in January 2009.

From tomorrow motorists will have had to cough up more for petrol for eight successive months.

Diesel prices are also fast approaching the R10 a litre mark. The wholesale price of diesel with a 0,05 and 0,005% sulphur content will increase by 16 cents a litre tomorrow.

This will undoubtedly place a heavy burden on a variety of business sectors, expecially transport and logistics, agriculture and manufacturing.

Mahomed Essa of transport company Grangold Logistics told The Witness, “It’s affecting us big time in terms of our cost.

“Fuel is a direct charge, but that’s not being carried down from suppliers,” he added.

“ It affects both cashflow and service utilisation.”

Joy Randall of Zippy Business Services said she will be forced to increase prices to offset the increase in the petrol price.

Zippy’s petrol costs have risen by 30% over the last six months.

Rising crude oil prices are once again the main reason for the recent hikes.

The recent strength of the rand against the U.S. dollar has helped shield consumers from bigger hikes.

Iit is unclear whether global crude oil prices will decline in the coming months.

Perhaps of equal concern is the fact that the fuel price hikes will push the consumer price index higher, raising the possibility of more intense interest rate hikes soon.

The price of illuminating paraffin will increase by 20 cents a litre, while the price of LP gas will increase by 53 cents per kilogram.

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