Fuel cost cuts will reduce inflation in the long run, says economist

The decrease in fuel prices tomorrow will impact the high inflation rate positively, according to an expert.

Economist Dawie Roodt said the decrease was good news for the economy.

“It will have a positive impact on inflation in the coming months, considering the decrease and the high basis points laid down last year,” he said.

“The rand started the year on a good footing and if you combine that with the decrease in fuel, it can help decrease inflation in the long run.”

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The Automobile Association (AA) said motorists could expect a significant fuel price reduction to start this year.

Spokesperson Layton Beard said both grades of petrol, diesel and illuminating paraffin prices were showing substantial decreases that will come into effect when the official adjustment for January is made tomorrow.

“According to the data, petrol [both grades] will decrease by about R1.85 per litre, diesel will decrease by between R2.47 per litre and R2.59 per litre and illuminating paraffin will decrease by around R1.93 per litre,” Beard said.

The reductions will see fuel prices decrease to prices last seen in March 2022.95ULP inland is expected to decrease to about R21.57 per litre and R20.92 per litre at the coast.

According to the Central Energy Fund, the reductions were the result of a stronger average rand/ US dollar exchange rate and significant decreases in international product prices.

“These decreases will not take fuel prices to levels seen in January 2022 but will, nonetheless, go a long way to alleviating the fuel price burden – and its associated impact on other prices – felt by millions of South Africans,” said the AA.

“For many travellers who are currently on holiday, this is also good news as it will reduce expenses on the return leg of their journeys.”

One resident, Lindy Aldrich, said the drop in diesel was welcome. “For our household, it was great news.

“We currently fill up our 25-litre generator every second day. That’s not even fuel for the cars. So it adds up.”

Aldrich said the decrease meant they would save R50 on every 25 litres.

“That all adds up to a saving of about R150 to R200 per week on the generator,” she said.

Lani Scheepers said she was considering looking for work closer to home to save money.

“Last year, petrol cost me up to R5 500 a month because I travel 50km to work and 50km back home,” she said.

Scheepers said last year it cost her R600 per week to fill up her tank.

“By the end of the year it had increased to R1 500 to fill up a tank of diesel,” she said.

Scheepers said the decrease was a relief.

“But I remain sceptical. Last time they said it was decreasing by R2 and it only dropped by 50 cents,” she said.

Roodt said because the sharp increases started last year in March, the impact of the decrease would only be felt by March this year.

– marizkac@citizen.co.za

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