Bad news for consumers as fuel price hike expected next week

THE Automobile Association (AA) has forecast more bad news for struggling consumers as it predicts another fuel price increase for next month.

Economist Dawie Roodt said the country should expect an increase in both grades of petrol of at least 35 cents a litre.

“There are two major contributing factors to the expected increase. The first issue is the price of Brent crude oil that has increased by four dollars more for the month of July, which is equivalent to an increase of about 5%.

“On the other hand the rand was stronger. Unfortunately the strengthening of the rand was only about 2% and is the reason we will be seeing a fuel price increase,” said Roodt, adding that consumers should also expect an increase in the diesel price as it was more or less the same as international oil prices.

Professor Bonke Dumisa, an independent economic analyst, said consumers should expect an increase in both petrol and diesel prices.

“The main reason is that the international price of Brent crude oil has increased significantly. It has increased to about 77 dollars per barrel for July, and for the past few days it has been hovering just over 80 dollars per barrel.

“So there definitely will be an increase in the price of petrol. I’m not willing to speculate by how much it will increase. We have noted that the rand has been stronger, but it’s not enough to stop a fuel price increase.”

Dumisa added that this would have a direct impact on the consumer.

“The consumer had some welcome news when the interest rate did not increase last week, and this was due to lower fuel prices and inflation dropping to lower than 6%.

“However, another fuel price will definitely affect inflation, and if this does go up this could be bad news for the consumer as we could then see another interest rate hike in September.

“The other consequence is that we can expect the petrol and diesel prices to filter through and see higher food prices and higher prices of goods.”

Professor Irrshad Kaseeram, of the University of Zululand’s Economics Department, said the petrol price would go up while diesel was expected to rise by 53 cents a litre.

“This will put pressure on the long haulage industry, which will have some knock-on effect on all commodity and food prices.”

Kaseeram added that oil prices had been on the rise from lower levels three months ago.

“The main reasons are due to tightening supplies as Opec (the Organization of the Petroleum Exporting Countries) indicated. Moreover, China has indicated that it will be demanding more oil to shore up its reserves in anticipation of its economy beginning to take off again since the harsh lockdowns.”

AA spokesperson Layton Beard said that mid-month data indicated ULP95 petrol was showing an increase of about seven cents a litre, while ULP93 was showing a nominal decrease of just over one cent a litre.

“Diesel, however, is again showing significant increases for the second month in a row. The outlook is of an increase of about 48c/l. Illuminating paraffin is also showing an increase of about 47 c/l.”

Beard said the current trajectory indicated that all fuel would be more expensive in August.

THE MERCURY