A bleak festive season is on the cards if the current rate of fuel increases continues over the next two months, an economist warned following the announcement of a steep hike effective from midnight on Tuesday.
“We might face a dim festive season if the current pace of fuel price increases is sustained in the two months ahead," said Paul Makube, Senior Agricultural economist at FNB Agri-Business.
The Department of Energy (DoE) announced on Monday that both grades of petrol, 93 and 95 (ULP & LRP), will increase by 99 cents and 100 cents a litre (c/l) respectively.
This brings the overall retail price of 95 ULP for motorists in Gauteng to R17.08 c/l and R16.49 c/l at the Coast.
Makube said the latest increase would “place a further strain on consumers and will hurt consumption growth in a weak economy”.
Fuel prices have been rising sharply since March, on what the authorities attribute to the weakening rand exchange rate and high international oil prices.
“Small business and the poorer households will bear the brunt as transport costs account for a large portion of their expenditure and the consequence of sustained fuel price increases will further erode disposable income and cause financial stress,” said Makube.
The latest increase comes on the back of figures released by the Reserve Bank that showed household consumption had already fallen by 1.3% in the second quarter of 2018, while spending on goods went down by 11.2%.
“This will force a change in spending patterns with a cut in spending on luxury items and frequency of visits to eateries,” he said.
In September, the DoE decided to intervene temporarily to provide some relief against fuel price hikes.
The South African Petroleum Industry Association (SAPIA) called on fuel industry stakeholders, including business, government and civil society, to work together to explore ways of saving on fuel costs.
“We expect high fuel prices to persist for some time given high global oil prices caused, among other reasons, by looming US sanctions against Iran, and the relatively weak rand,” said SAPIA Executive Director Avhapfani Tshifularo.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER