Fuel price decrease will ease woes

The 22c a litre drop in the price of fuel on Wednesday will provide a bit of breathing space for heavily indebted consumers. The wholesale price of diesel, meanwhile, will drop by 23.58c a litre and that of illuminating paraffin by 10c a litre.

Neil Roets, CEO of Debt Rescue, said the price decrease will somewhat lighten the burden of middle calls South Africans but it would have little impact on the more than 25% of South Africans who are unemployed.

“South Africa is a deeply indebted country with the total consumer debt totalling R1.47 trillion. This means that most South Africans owe more than 75% of their gross monthly income to creditors. With more than a quarter of South Africa’s work force unemployed, it is going to take much more than a drop of 22c a litre in the price of fuel to bring meaningful relief to consumers who are falling ever deeper into debt,” Roets said.

Roets said a clear indicator of the dire situation that consumers are finding themselves in is the fact that debt councillors are showing exponential increases in the number of clients seeking protection under debt review.

“In our case we see a quarterly increase of about 20% in the number of clients knocking on our door for help. We know from discussions with our opposition that many of them are showing much the same growth rate,” Dawie Roodt, an independent economist with the Efficient Group said in addition to the 22c a litre decrease on Wednesday, there might be further decreases down the road if the Rand continues to improve against the US Dollar.

“Our currency has been performing well against the Dollar and there is every indication that this will continue to be the case for the foreseeable future. This will result in further decreases.”

Roodt said one glimmer of hope in the long term was that if fracking in the Karoo proved to be viable, this could add significantly to the local supply of crude oil which might help to stabilise fuel prices.

“We are already seeing a reduction in the world price of crude thanks to substantial new production from fracking in the United States and elsewhere.”

He predicted that these increased supplies would force the price of crude to below US$100 a barrel.

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