Economists predict another big fuel price hike in October

South Africans will likely have to brace themselves for yet another fuel price hike as economists predict a grim outlook for prices in October.

Last month saw a substantial increase in fuel costs, with petrol rising by about R1.71 per litre and diesel surging by R2.80 per litre.

However, it appears the storm is far from over as experts forecast even more pain at the pump in the coming month.

Ripple effect

Frank Blackmore, lead economist at KPMG, expressed his concerns about the upcoming fuel price hikes.

“Given recent values, an additional R1.20 increase in 95 octane, R1.15 increase in 93 octane, and diesel around R2 increase per litre for October are expected,” said Blackmore.

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Blackmore emphasised the potential ripple effect on the economy, particularly in the transportation sector, which heavily relies on diesel.

“If we combine the current forecast for an increase with last year’s actual increase, it gives about a R5 increase per litre over two months – a significant burden on consumers who will ultimately bear the brunt through higher prices for goods and services.”

Blackmore also said the impact of fuel price hikes extends beyond the pump.

“The weight of fuel prices in the Producer Price Index (PPI) is just under 5%, and in the Consumer Price Index (CPI), it’s just over 4%. Any increases in fuel prices have a significant impact on the economy, and this will likely result in slower decreases in inflation,” he warned.

Slower inflation reduction could lead to a prolonged period of higher interest rates, affecting both consumer and business spending, and potentially stunting economic growth.

Financial caution

Brina Biggs, senior manager at 1Life Insurance, echoed the sentiment of financial caution.

“The world has become a topsy-turvy place with various factors like war, high Consumer Price Index (CPI), food inflation, a weaker rand, higher oil prices, and ongoing electricity woes contributing to the financial strain faced by South Africans,” she said.

Biggs emphasised the need for prudent financial planning and advised consumers to “tighten their belts, avoid taking on more debt, and prepare for the ongoing high cost of living”.

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Hayley Parry, money coach and facilitator at 1Life’s Truth About Money, highlighted the challenges consumers face.

“Following September’s steep petrol price increases, it’s not looking good for consumers in October. Strong international oil prices and a weak rand may lead to another 80c petrol price increase and R1.50 on diesel per litre,” Parry cautioned.

She recommended considering options like carpooling and belt-tightening to navigate the challenging financial landscape.