Petrol price increase will push everything up

Expect a succession of fuel price hikes that could impact the economy strongly over the next few months, says the AA.

Expect a succession of fuel price hikes that could impact the economy strongly over the next few months, says the AA.

Published Dec 29, 2016

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Durban – Consumers may be faced with increasing household costs in the new year if a predicted petrol price increase of almost 50 cents goes ahead.

Independent economist Fanie Brink said the forecast for 4 January, based on statistics released by the Department of Energy on Wednesday, could see the prices of petrol and diesel (with a 0.005 percent sulphur content) increase by 47.2c per litre and 34.9c per litre respectively.

“The reasons can largely be attributed to the much higher international petroleum product prices after members of Opec and the 11 countries that are not members, including Russia, finally reached an agreement to place a limit on production after years of struggling to achieve this objective,” said Brink.

The agreement, he said, had caused the price of Brent crude oil to rise to almost $56 (R770) a barrel over the past couple of weeks.

The Automobile Association, commenting on unaudited mid-month fuel price data released by the Central Energy Fund, said earlier in December there would be increases in fuel prices by the end of the month.

“If the oil-producing countries adhere to the proposed production cuts," it said, "oil prices are likely to strengthen until demand and production move back into equilibrium.

“Even a stronger rand could be overpowered by a sharp climb in the oil price, potentially meaning a succession of fuel price hikes that could impact the economy strongly over the next few months.”

The body advised motorists to review their energy use and commuting patterns, and consider alternatives to single-occupant vehicle use, such as car-pooling.

“Mitigation will be the key strategy against prolonged fuel price rises.”

Whether you want bread or beer, one thing is clear: you will pay more.

Economist Dawie Roodt said consumers would be hard hit; the predicted increase could also keep inflation levels elevated – but not all the news was bad.

“This increase comes at the beginning of the year, which is generally a quiet time," he said. "Because people have spent a lot of money over the festive season, it will be difficult for stores to further inflate prices. For the next three months, things should remain the same.”

Director of Pietermaritzburg Community Social Action, Mervyn Abrahams – whose activist organisation tracks the monthly food inflation on 36 basic items – said food prices would increase.

“Transportation costs and the increased cost of manufacturing packaging could further increase food prices. These impacts could linger, especially for those in the lower socio-economic brackets.”

He said those in poorer households spent 75 percent of their budget on food, and the increase in prices could lead to them dropping vital items from their baskets in an effort to save money.

“We find that people leave out things such as vegetables and rather purchase ‘big items’ such as maize meal and bread.”

The Mercury

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