The conflict taking place in the Middle East between Iran, Israel and the US has placed global oil markets in turmoil and in South Africa, the effects are already being felt by consumers, with a lot worse to come.
Already, airlines such as FlySafair and SAA have increased ticket prices for customers to contend with the spikes in fuel prices and energy supply issues stemming from the war. Adding to this, there have been predictions of a record high fuel price increase at the beginning of April for South Africans.
Rubbing further salt into the wounds for consumers, the South African Reserve Bank’s (Sarb’s) Monetary Policy Committee (MPC) are also due to meet at the end of March, with economists predicting that issues from the geopolitical tensions will result in no cut to the country’s repurchase rate (repo rate) which determines the prime lending rate.
Before the outbreak of hostilities, roughly 20 million barrels per day (mb/d) of crude oil and petroleum products passed through the narrow waterway linking the Persian Gulf with global markets. But since the conflict escalated, flows have plunged to a trickle, leaving producers with limited options to move oil and forcing widespread production cuts.
Debt Rescue CEO Neil Roets said the possibility of the largest petrol price increase in South Africa’s history could not have come at a worse time for financially strained consumers.
“South Africans are already battling with rising living costs, high interest rates and stagnant income growth. The prospect of petrol jumping by several rand per litre places enormous additional pressure on household budgets that are already stretched to the limit,” he said.
Roets added that the warning for motorists to brace themselves for major strain on their pockets highlighted the difficult financial reality facing many South African households.
“For millions of consumers, fuel is not just another expense. It affects how people get to work, transport their children, and ultimately the price of food and goods. When fuel prices rise sharply, it pushes up the cost of living across the entire economy,” Roets said.
He also pointed out that motorists will be hit by additional fuel taxes from April 1, adding further pressure.
“South Africans also have an added stressor in the equation, with fuel tax hikes coming into effect in April, adding another 21 cents per litre to the price of fuel. At a time when households are already cutting back on essentials, even small increases compound the strain.”