Fuel price hike means not-so-happy Christmas for consumers

A bleak Festive Season could be in store for cash-strapped consumers on the back of this week’s fuel price hike.

According to Gavin Kelly, the CEO of The Road Freight Association (RFA), the higher fuel price will have a direct impact on transportation costs for goods and services. He says the higher prices will be borne by the consumer, who might yet be in for another blow before Christmas.

“Consumers have enjoyed – for the first time in the Reserve Bank Repo Rate cycles – a breather when it kept the rate unchanged in July. However these sorts of fuel price increases could wipe out the gains in taming inflation that the Reserve Bank has won,” says Kelly.

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Bleak outlook

“However, should an interest rate increase occur, that – together with transportation costs for goods and services – will grip the consumer in another tight financial squeeze just before the Festive Season. This is when, traditionally, many retailers have generated income to carry them through the financial year.

“There are many consumers who will stay at home and cut the lavish spending associated with the Festive Season.”

On Wednesday, the diesel price increased by R2.76 for 500ppm and by R2.84 for 50ppm. That hiked the inland pump prices up to R23.05 and R23.28 respectively.

Both grades of petrol went up by R1.71. A litre of 93 octane now costs R24.14 Inland, while 95 costs R24.54 per litre.

The Central Energy Fund attributed the fuel price hikes to rising international fuel prices and the weakened Rand.

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Domino effect

Road freight transporters use both petrol and diesel – but diesel is the main fuel in most road operations. Once fuel prices increase, transporters will need to increase their pricing to cover the increased cost of diesel.

Kelly says as 85% of all goods moved through and around the country have a road leg at some part in the journey. It is virtually impossible for consumers to dodge the bullet.

“You and I will pay more for … well … everything. From food to fuel, from clothing to electronic goods and everything in between. Prices will rise – some immediately, but more so a domino effect will ensue, the next in a long line of such domino effects that we have seen too often in the last few months.”

Kelly adds that one of the biggest challenges faced by transporters is paying higher fuel prices while having to wait for up to three months to be paid for their own work.

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Fuel price affects everyone

“Whether we like it – or not – the continuous increases in the price of diesel inevitably drives the cost of transport and logistics up – step by step. And, with roughly 85% of all goods moved through and around the country having a road leg at some part in the journey, there will be increases to consumers, as the cost to transport goods increases.

“There just aren’t limitless reserves of cash to continue the high level of fuel expenditure against the delayed payment for work already done,” says Kelly.

“The RFA is hearing from more and more of its members how the fuel cost strain is affecting survival. More and more businesses are in stress or business rescue, while customers reduce volumes that need to be transported or even curtail stock movement depending on consumer consumption levels.”

*The Road Freight Association was established in 1975 to support its members who are mainly road freight operators.