Fuel price hike tonight to have ripple effect

FROM MIDNIGHT tonight, con­sumers will pay more for fuel and should brace themselves for fur­ther increases, including in meat prices, by the end of the year, experts say.

The price of petrol will increase by 44 cents a litre and diesel by 22 cents.
Gwarega Mangozhe, the chief executive of the Consumer Goods Council of South Africa, said the higher fuel price, which was linked to the weakening of the rand, would inevitably impact on dis­posable household incomes which were already under pressure.

“Consumer spending is sub­dued and some of our members have noticed a change in shopping habits as consumers search for bar­gains, while some are prioritising their overall spend on groceries in light of tighter disposable incomes.

“While we remain confident that many of our members will experience a fairly busy festive trading season, the overall outlook remains uncertain given the pre­dicted low economic growth.”
Momentum economist Sani- sha Packirisamy said the 43c/l under-recovery in the price of pet­rol last month was largely a func­tion of a 1.7 percent depreciation in the rand against the dollar between August and September and a 0.4 percent up-tick in average monthly international oil prices.

She said the Organisation of the Petroleum Exporting Coun­tries (Opec) caused a 7 percent rise in international oil prices late in the month owing to a largely unexpected agreement by Opec to cut production levels.

“If oil prices persists at these levels there could be a further increase in petrol prices next month, should the rand stay at similar levels as well.”

The rand was also under pres­sure from heightened fears around a sovereign ratings downgrade by Standard & Poor’s rating agency in December on the back of weak growth fundamentals and policy incoherence, she said.

Standard Bank economist Kim Silberman said the outlook for the remainder of the year was for the petrol price to continue to rise, which would add pressure to con­sumers’ disposable income.

“However, the effects of the fuel price are far broader than that and will most likely feed through to the price of public transport and the general cost of producing goods and services.

We expect meat price inflation to accelerate in Decem­ber,” she said.
Neil Roets, chief executive of debt management firm Debt Res­cue, expected further increases in the price of fuel towards the end of the year.

“The ongoing political bick­ering within the ANC and an extremely sluggish economy is likely to impact on the rand and it looks as if the price of crude oil may also be on the rise,” he said.
Roets said one of the major effects of the fuel price increase on the economy would be the con­tinued rise in the price of food.

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