Return of the fuel hike woes – worse than ever

AFTER months of sharp decline in petrol prices thanks to the plummeting global oil prices, motorists once again face a bumpy ride ahead.

The price of fuel is expected to increase by the highest nominal amount in history next month.

According to Solidarity Research Institute (SRI), 95-octane petrol will most likely rise by around R1.55 per litre on 1 April, while 93-octane petrol will go up by 5c less.

Wholesale diesel is likely to increase by R1.15 a litre.

‘These steep increases stem partly from the 80,5c government levies on fuel announced by the Minister of Finance in his budget speech,’ said SRI Senior Economic Researcher Paul Joubert.

‘The remainder of the increases will be due to higher oil prices in March, as well as the weakening of the rand against the US dollar.

‘Even if during the rest of March oil prices fall to the extremely low levels of around $46 per barrel seen in mid-January, the petrol price will still rise by about R1,40 per litre,’ Joubert said.

High fuel prices will trigger a spike in food prices, digging further into the consumer’s pocket.

Deputy Dean in the Faculty of Commerce Administration and Law at the University of Zululand (Unizul), Dr Irrshad Kaseeram, expects food prices and inflation to escalate in reaction to the levies and weak rand.

‘Our living standards will fall – at least back to before the fall in oil prices.

‘This means the possibility of the South African Reserve Bank lowering interest rates is reduced even further, and later in the year it might even increase if inflation rises above the 6% level.

‘This scenario becomes even more likely if the rand’s weakness persists.’

If the frail oil price stabilises, fuel prices could skyrocket more, but fortunately Kaseeram believes there is little chance of this happening within the next few years.

‘Oil producing economies are fully aware that if the price of oil rises above $80, they will face stiff competition from oil from shale producers in the US.

‘As long as global demand remains weak, I don’t expect oil prices to rise above $80 a barrel over the next two years, so there will be some respite for consumers.

The Department of Energy will make the final announcement regarding fuel price changes on 27 March.