Home South African Relief at fuel pumps forecast but no drop in food prices yet,...

Relief at fuel pumps forecast but no drop in food prices yet, say economists

300

Economists have predicted a big drop in fuel prices on Wednesday, but were quick to caution consumers that this is unlikely to cause a reduction in food prices.

Economists are expecting a drop in fuel prices this week. File picture: Independent Media

EXPERTS have predicted a big drop in fuel prices on Wednesday, but were quick to caution consumers that this is unlikely to cause a reduction in food prices.

Economist Dawie Roodt said he expected a big decrease in the fuel prices.

“The petrol price will come down by at least R2 a litre, while the diesel price will decrease by more than R1 a litre.

“This will help to reduce some of the upward pressure on inflation which was at 5.4% for September. Unfortunately, the fuel price decrease is unlikely to result in any food price decreases. However, it can help to slow down the rate at which food prices are increasing.”

Professor Bonke Dumisa, an independent economic analyst, agreed that the fuel prices would decrease.

“I wouldn’t want to speculate on the amount of the fuel price decrease, but it will be a big drop. We can attribute the decrease in the fuel price to the decrease in the price of Brent Crude oil decreasing to $89 a barrel in October compared to $93 a barrel in September.”

Dumisa added that consumers wouldn’t see an immediate impact on food prices.

“Inflation spiked because we saw two big increases in the fuel prices. Inflation was at 4.8% in August and 4.7% in July, but spiked at 5.4% in September. Food inflation is around 8% and this is another contributor to why core inflation has risen to 5.4%. The fuel price decrease will assist in reducing food inflation and in the long run could result in lower food prices.”

Professor Irrshad Kaseeram, of the University of Zululand’s Economics Department, said the effect of the fuel price decrease would be minimal on food prices.

“A fuel price decrease is definitely welcomed, especially to motorists and the trucking industry. However, it won’t have a major impact on food prices.

“Remember, the price of fuel is still very high and so one big decrease in fuel is not going to drop food prices. Unfortunately, to see a big decrease in food prices, we need to see a major drop in the international price of Brent Crude oil, which I don’t see happening any time soon. For now we can take comfort that a fuel price decrease could cause inflation to drop and hopefully lead the Monetary Policy Committee to leave interest rates unchanged in November.”

Mervyn Abrahams, programme co-ordinator at the Pietermaritzburg Economic Justice and Dignity Group, said food prices didn’t go down as they should when the fuel price decreased.

“When the fuel price increases, we see that there is an immediate impact as food prices also go up. However, it’s not the same when the fuel price decreases, the price tends to remain the same or there is a slight reduction on certain food items, but the majority of prices remain the same. So I wouldn’t expect any major changes in food prices, especially with the holidays approaching.”

Layton Beard, AA spokesperson, said unaudited data from the Central Energy Fund pointed to a decreases in petrol of up to R2/litre and a decrease in diesel of around R1/litre.

“After three months of significant increases, both petrol and diesel prices are expected to fall below the R25/l mark again. This is good news for motorists, consumers, and the economy, especially heading into the end of the year.”

Previous articleProteas’ strength will be put to the test against New Zealand, India at Cricket World Cup
Next articleEC pupils in hospital after eating ‘expired’ snacks