Surge In Fuel Prices Likely To Put Pressure On Inflation

The Department of Energy says motorists will have to pay 74cents a litre more for petrol and 91c a litre more for diesel, due to rising oil prices which offset a stronger local currency last month.

SA Institute of Race Relations chief economist Ian Cruickshanks said the fuel price hike would ripple through all sectors immediately, reinforcing renewed rising consumer price index trend. Domestic petrol prices decreased by a cumulative R3.07 per litre for 95 unleaded in December and January.

The South African Reserve Bank in January flagged volatile international oil prices as one of the risks to the inflation outlook.

Analysts from Momentum Investments said upward revisions to inflation in the near term could be attributed to the Eskom electricity tariff risk and volatility in the oil price.

The surge in fuel prices also comes on the heels of hikes in Road Accident Fund levies and the impending introduction of a carbon tax.

Dawie Roodt, the chief economist of the Efficient Group, said consumers were also about to be hit by higher toll fees, new taxes and hikes in three existing taxes between March and June.

“The rise in tolls by Sanral, on top of the fuel price hike, is going to affect all South Africans thanks to the fact that most freight is now transported by road, because of the total collapse of the freight rail network under the stewardship of a corrupt and bankrupt Prasa,” Roodt said.

The agricultural sector, which is a significant provider of employment, especially in the rural areas, and a major earner of foreign exchange was also expected to come under pressure due to the rising oil prices.

Dawie Maree, the head of information and marketing at FNB Agribusiness, said the hike in fuel prices would have a severe impact on the cash flow of farmers.

“From a farm producer level, we are currently experiencing a late season, whereby farmers are still using a lot of diesel. This follows the Budget speech announcement that the fuel levy will increase by 30c per litre for diesel from April 1, which adds to the woes of producers,” Maree said.

“Furthermore, given that 70percent of South Africa’s food is transported by road, the increase in the diesel price will have a negative impact on food inflation, and the disposable income of consumers who are already struggling to make ends meet.” -BusinessReport