How the rising petrol price will affect your pocket

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Johannesburg - Consumers should brace themselves for yet another steep petrol price hike at the end of May, according to the Automobile Association (AA) which warned on Tuesday that the petrol price could rise by 74 cents a litre, with diesel going up by 81c/l and paraffin by 78c/l.

This projected fuel price increase follows two successive hikes in April and May, against the backdrop of a raised government fuel levy, a weaker rand and a strengthening international Brent crude oil price.

Fin24 spoke to Ofentse Mokwena, a transport economics lecturer at the University of the North West, about the impact this will have on consumers and motorists.

Motorists

Mokwena said people who are able to purchase vehicles with low carbon footprints will be cushioned significantly, compared to those who commute and are stuck daily in congested traffic without stop-start technology in less efficient cars.

Stop-start technology is usually found in modern, upper-end cars which use a computer to sense when the car is stationary to shut down the engine, reducing fuel consumption and emissions.

Consumer goods

Mokwena believes that another fuel price increase will push freight costs up, which will likely be passed on to the consumer.

“Consumers may well feel the cumulative impact of the additional transport costs along the supply chain that produces most goods.” However, he added that the effect will not be immediate.

Likely increases in consumer goods prices come after value-added tax went up to 15% in April.

Public transport commuters

As South Africa does not have a single transport economic regulator, individual public transport operators set their own prices.

Mokwena said bus companies will be the most exposed to yet another fuel price hike, as they face increased labour costs after a negotiated settlement following a nearly four-week strike in the sector.

Another factor affecting public transport costs is the possibility of increased numbers of people opting to walk or cycle due to rising prices. This could lead to lower volumes of people on buses, in turn raising ticket fees.

Mokwena added that this period should be used by the transport market to expand its energy sources. There is also potential for independent power producers to introduce electric buses and vehicles.

Paraffin users

The majority of South Africans use electricity for heating and cooking, but significant numbers of people still rely on illuminated paraffin as a power source.

According to Statistics South Africa’s General Household Survey 2016, 84.2% of the population is connected to electricity while 76.8% use it for cooking.

The AA expects the cost of paraffin - a zero-rated VAT item - to rise by 78c/l at the end of May and is concerned about the impact of the hike.

“Worryingly, people who use illuminating paraffin for lighting, heating and cooking will suffer a further blow as the country heads into winter.”

The Department of Energy usually announces the official change to the fuel price in the last week of the month.


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