Experts say hike in diesel price, forecast for May will hurt consumers and businesses

Economists said consumers were already feeling the impact of exorbitant fuel prices which was putting pressure on businesses

File Picture: Karen Sandison African News Agency (ANA) Archives

Published Apr 29, 2022


Experts predict that there will be a minor decrease in the petrol price, however, it will bring little relief for struggling consumers and businesses as a steep increase in the price of diesel is expected in May.

The latest data released by the Central Energy Fund shows an over-recovery for the petrol price, but a fairly steep under-recovery for diesel.

Professor Bonke Dumisa, an independent economic analyst, said that an increase in the diesel price was possible.

“We have to attribute this to the rocketing international price of Brent crude oil and the weakened rand.”

Dumisa added that a diesel price increase would have a major impact on consumers and businesses.

“Most of the trucks that deliver goods and food use diesel, farmers also use diesel, and no matter how little or how huge the increase for diesel is, we will all be affected. The businesses are the middleman and they will push the price on to the consumer. We can expect bus fare prices to increase and prices at supermarkets to be more expensive.”

He said that another concern was that the increase in the diesel price would cause a rise in inflation.

Professor Irrshad Kaseeram, of the University of Zululand Economics Department, said consumers were already feeling the impact of exorbitant fuel prices which was putting pressure on businesses.

“We have to remember the rail infrastructure is not good and that most of the transportation of goods is being done by road, and trucks use diesel. An increase in the diesel price will cause an increase in input costs. The price of retail, manufacturing and mining will all go up because of an increase in the diesel price and this will put a strain on the economy and workers, who will demand a wage increase to match the rising cost of living. Businesses will also feel the strain of the increase in the diesel price and this will lead to more borrowing and more debt in South Africa.”

He added that South Africans had to hope the conflict in Ukraine came to an end. “The conflict is influencing prices internationally, we have to hope the war does come to an end so that international prices come back to some normalcy. In the meantime, we hope the government does step in and not increase the fuel tax, as this will provide relief to consumers and businesses.”

The AA’s spokesperson, Layton Beard, said that diesel was a huge input cost in the manufacturing, agricultural and mining sectors and an increase in the price of fuel would certainly have a knock-on effect on consumers as role-players in these sectors added these costs to their prices to cushion the blow.

“Although the unit prices of goods may increase marginally, the cumulative effect of many increases on many products will be quite hard for many, especially the poor.”

Dr Ntokozo Nzimande, a senior lecturer in the Department of Economics at UCT, said: “Transportation costs will surely increase, and that means the whole economy or all industries will feel the pain. We are still struggling to recover from the impact of Covid-19, and most importantly failing to deal with Eskom issues (load shedding), these issues combined will prevent our economy from growing or recovering, at least.”


Related Topics:

Fuel PricesPrice Hikes