Tag: petrol

Motorists one of junk’s first victims

A fuel price increase will be the first major expense to hit South Africans as a result of a weaker rand‚ the Automobile Association of SA (AA) has warned.

The AA’s mid-month data forecasts that petrol will rise 55c a litre in May‚ while diesel will cost about 30c a litre more. Illuminating paraffin will cost an estimated 41c a litre extra.

The fuel-hike predictions are based on unaudited mid-month fuel price data released by the Central Energy Fund.

“The loss of confidence by investors and the sovereign ratings downgrades by ratings agencies Fitch and S&P‚ have led to the rand slipping against the US dollar‚ down from around R12.35 at the beginning of the month to its current position of around R13.40‚” said the AA’s Layton Beard.

The AA said the rand’s weakness largely contributed to the expected fuel price increase‚ with hikes in international petroleum prices accounting for the balance.

“However, there is no certainty that the impact of the downgrades has been fully priced into the economy. The picture for May could be substantially different‚” Beard said.

By Suthentira Govender for www.businesslive.co.za

SA consumers under the cosh

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

The price of petrol will increase by 44 cents a litre and diesel by 22 cents.

Gwarega Mangozhe, chief executive at the Consumer Goods Council of SA, says the higher price of fuel, which is directly linked to the weakening of the rand against the dollar, will inevitably impact on disposable household incomes which are already under pressure from other cost increases.

“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 during 2016.”

Momentum economist Sanisha Packirisamy, says 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 uptick in average monthly international oil prices over the same period.

Packirisamy says 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 persist at these levels there could be a further increase in petrol prices next month, should the rand stay at similar levels as well.”

She added the rand was also under pressure from heightened fears around a sovereign rating downgrade by Standard and Poor’s rating agency in December on the back of weak growth fundamentals and persistent policy incoherence.

“In our view, the expected rise in petrol prices still leaves the year-on-year inflation rate in private transport costs in the Stats SA consumer basket at reasonably low levels.”

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

Silberman says consumers spent on average 5.7 percent of their income directly on petrol, which added 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.”

Neil Roets, chief executive of debt management firm Debt Rescue, says he 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.”

Roets says one of the major effects of the fuel price increase on the economy would be the continued rise in the price of food.

“The announcement by the Red Meat Producers Association that the red meat price could increase by as much as R8 per/kg in the short term and that it could take between three to five years to restore herds following the severe drought, is bad news for consumers who are dependent on meat for their daily survival.”

Roets says the real elephant in the room was the expected downgrade by the ratings agencies later in the year.

“Despite all the efforts by the government to persuade the agencies that the economy was on the mend, they are not buying into the narrative and the reasons are clear: widespread corruption and parastatals like Eskom and SAA that are burning through taxpayers’ money at an alarming rate.”

Damon Sivitilli, head of marketing at city debt management firm DebtBusters, says the price of fuel increasing put more pressure on the already strained budgets of many consumers.

He says not only would the fuel hike and the resulting increasing cost of commodities choke consumers, it would also have a huge impact on small businesses across the country.

Sivitilli advised consumers to start reviewing their budgets by looking at their needs and adjusting their spending on luxuries in order to survive the economic and political turmoil.

“The repo rate went unchanged last month due to stable inflation rates, but the upcoming increase in petrol costs may put pressure on this once again and continue the trend of rising inflation and costs into the new year.”

A petrol price hike of between 17 cents and 18 cents a litre is likely in May‚ according to the Automobile Association (AA).

Diesel and illuminating paraffin‚ however‚ are set for decreases of 11c to 12c a litre.

Commenting on unaudited mid-month data released by the Central Energy Fund (CEF)‚ the AA said on Monday that rising international oil prices were continuing to do battle with gains in the rand/dollar exchange rate.

“We are seeing a gradual‚ but sustained return of strength to petroleum prices‚” the AA says.

“On the international market‚ diesel and petrol prices have risen since late February‚” the Association explains.

“The appreciation of the rand against the US dollar has gone some way to offset this‚ meaning that diesel and illuminating paraffin are heading for reduced prices‚ while petrol is set to climb‚” it adds.

“Both the exchange rate and international oil prices continue to be volatile‚ and the month-end picture could be quite different from the current one‚” the AA says.

Source: www.bdlive.co.za

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