Fuel price hike hits hard

Kwa-Zulu Natal

Durban - Tonight’s national 25c petrol price increase will mean South Africans living along the coast will once again be paying close to R12 a litre.

In May, the petrol price rose at the coast to R11.87 and inland to R12.22 – the most ever paid for petrol. Tonight’s increase will see petrol sell for R11.85 and R12.20 respectively.

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A motorist holds a fuel pump at a Gulf petrol station in London in this April 18, 2006 file photo. Oil dropped nearly 2 percent on March 20, 2012 as Saudi Arabia sought to knock back crude's price rise that has threatened the global economy, with the oil minister offering the most detailed argument to date that the OPEC nation was prepared to meet any supply shortfall. REUTERS/Luke MacGregor/Files (BRITAIN - Tags: BUSINESS ENERGY COMMODITIES)Durban02102012. Rondo Govender in his taxi.

Analysts believe that petrol at the coast could break through the R12 a litre barrier this year, making it a hard pill to swallow for motorists, who paid R3.60 a litre for petrol just 10 years ago.

Dawie Roodt, chief economist at the Efficient Group, said several factors contributed to the rise in petrol, the most important being inflation.

“Over the years the rand has lost a lot of its value. The second reason is taxes. The minister of finance, like all politicians, [is] always looking for money to add to the fiscus. Over the years the minister has increased the tax on petrol, which now accounts for 40 per cent of fuel costs,” he said.

Roodt believes that SA should, if we are to see a drop in the petrol price, follow the example of other countries that have deregulated the price of fuel.

“If we deregulate the petrol price, people can sell petrol at any price they like. Currently you are not allowed to sell petrol more or less than what is determined by the department of mineral and energy affairs.

“Typically what would happen is a big retail group will have a couple of garages which would be near the shops and would entice people to shop there.

“The opposite, unfortunately, is that the smaller towns will see an increase in petrol because they do not have the economics of scale of the bigger towns and the petrol price is likely to go up. But over time the petrol price will affect actual market forces,” Roodt said.

Reggie Sibiya, chief executive of the Fuel Retailers’ Association (FRA), said deregulation of the petrol price would lead to massive job losses.

“The first thing that is likely to happen after overnight de-regulation is that the oil companies would offer price support at sites owned by them. This price support is provided on condition that it is reflected at the pump price. Most importantly, this would appear to be good news initially for the motorist, who will see this price support as price reductions at the pump,” Sibiya said.

In the long term small petrol station owners would be forced to close their business and turn to self-service stations to make a profit, he said.

“The short-term trend could be prices going down just to eliminate the small players and once the few big players have consolidated, prices will be rocketing again in a monopolistic market-domination fashion.

“We have seen this in other deregulated markets. Research shows that the most expensive countries on fuel have deregulated markets, so the arguments about deregulation driving prices down hold no water. Job creation is still a major priority for our country and this includes small business sustainability,” Sibiya said.

FRA executive director Avhapfani Tshifularo said South Africans were unlikely see low petrol prices again, such as the R3.60 motorists paid per litre in 2002.

“It will mean that levies and taxes will need to drop dramatically [from about 300c a litre to about 121c a litre] and international product prices will also have to drop substantially.

“Also, as the world economy recovers, the demand for oil products may increase, which may also negate any chance of substantial decreases,” he said.

Rondo Govender, who has ferried passengers around Clairwood in his yellow 1972 Chrysler Valiant for more than 30 years, remembers a time when petrol cost less than R2 a litre and passengers paid just 25c for the fare.

“I could fill this 60 litre tank with R100. Now it costs me more than R700… This car’s tank hasn't been filled to the top in years,” he said.

With tonight’s hike, Govender worries about the future and whether his customers, mostly unemployed and poor people, can afford another fare increase.

“After the recent petrol increase we moved our fare from R3 to R4. It was the first fare increase we had in years and we were forced to do it to stay in business.

“Even with that increase, we are still the cheapest taxis in the whole of Durban. If petrol continues to go up, we will have to move our prices up. Another petrol increase will hurt everybody,” he said.

Govender still manages to take a philosophical approach: “Paying for petrol is like breathing. You just have to do it if you want to live”. - Daily News

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