The rising price of Brent crude oil and a weaker rand has seen economists forecast a price increase of around R1/litre for petrol and as high as R2/litre for diesel.
ECONOMISTS have warned that consumers should brace themselves for a major increase in fuel prices next week.
Professor Irrshad Kaseeram, a professor at the University of Zululand’s economics department, said it was bleak news for motorists, businesses and the transport industry.
“The petrol price is expected to rise by R1.20, while diesel is expected to rise by close to R2 a litre.”
Kaseeram added that this was due to global oil prices rising by 40% since June.
Professor Bonke Dumisa, an independent economic analyst, said there would be a massive increase in fuel prices for October.
“We can attribute this to the increase in the price of Brent crude oil, which is averaging about $90 a barrel in September, while in August the average price of Brent crude oil was about $85 a barrel. To a smaller degree, we can also attribute this to the weaker rand against the US dollar. We can expect an increase of over R1 for petrol and around R2 for diesel.”
Dumisa added that inflation was expected to increase due to the fuel price increase.
“Inflation went up marginally in August to 4.8% from 4.7% in July and it was a marginal call at the Monetary Policy Committee (MPC) meeting where the interest rate could have been increased last week. If the fuel price does increase and inflation increases to over 5%, we can expect the South African Reserve Bank to hike interest rates at the next MPC meeting.”
Dr Sanele Gumede, an economics lecturer from the University of KwaZulu-Natal, said the weaker rand would impact the fuel price.
“The rand has been hovering around R18 or R19 to the US dollar, which is a huge concern. The other issue is that Opec countries are reducing oil production and this while there is still huge demand for oil.”
Gumede added that the increase in the fuel price had also come at the wrong time.
“An increase in the fuel price means that the price of food is going to go up. This comes at a wrong time as we are entering the last quarter of the year and the last thing that you want to see is a fuel price hike and food price increase causing a quarter of negative growth in the GDP.”
Economist Dawie Roodt said he expected an increase in the price of petrol of around R1.10 a litre and around R1.70 for diesel next week.
“This will cause upward pressure on food prices and inflation. I do not expect inflation to exceed 5% in the short term, which is still within the target range of the SA Reserve Bank. However, it is still bad news that we are expecting major increases in the price of fuel and diesel.”
Layton Beard, spokesperson for the AA, said the current data was indicating an increase to petrol of about R1.20/litre and an increase to the wholesale price of diesel by as much as R2/l.
“Illuminating paraffin is also set for another increase, with the data currently showing an under recovery of R1.84/l. Should these significant increases materialise, they will push fuel prices to levels last seen in July last year, stretching the personal finances of South Africans even further.”
Beard added that higher fuel prices would invariably lead to higher food prices.