/ 2 November 2011

Fuel increase threatens consumers’ Christmas spend

Consumers will be put under significant pressure during the festive season as the latest bout of fuel price increases filter down the economic price chain.

At midnight on Wednesday retail price costs of fuel rose significantly with petrol shooting up by 23 cents to R10.77 a litre for 95 unleaded petrol in Gauteng — the highest price South Africa has seen.

The cost of diesel also surged with the 0.005% and 0.05% sulphur content fuel enriched jumping 36c/litre, up to R10.08 and R10.01 respectively.

For consumers it will mean paying more at the pumps immediately but in the long run it means higher prices for goods and necessities such as food as transport costs steadily rise.

According to Andre Snyman of Debt Control Management, this could have a further knock-on effect of increasing debt levels as consumers attempt to keep up their usual festive season spending.

“People already can’t afford to pay their debt because debt levels are so high. Don’t be surprised if there is a shortfall in January as people realise their budgets didn’t stretch far enough. There’s even a chance for people in good credit standing to come under pressure,” Snyman told the Mail & Guardian.

Feeling the pinch
It’s been less than 24 hours since the rise hit pumps and a vox pop revealed motorists were already feeling the heat.

“This definitely has an impact on my pocket. In December everyone wants to drive about — I want to go to Cape Town and this increase along with the toll gates is going to kill my budget,” said Michael Raaff, from the seat of his Mercedes 220E.

But it’s not only those undertaking long journeys over the festive season that will feel the pinch.

“Fuel is already too expensive and it affects everything. Christmas is around the corner and I am already wondering where to get money for presents for my kids. Then before you know it, January is here and I’ll have to find money for school clothes and fees — it’s impossible,” motorist Joe Nematangari told M&G as he filled up Toyota RunX 1.6.

Even those using public transport like minibus taxis will be affected by soaring petrol costs.

The South African National Taxi Council and United Taxi Association Forum have already said taxi fares will be increased as fuel costs are absorbed by operators.

Jack Dlamini, a taxi driver along the Rosebank to Johannesburg route, says fuel price increases have an immediate impact.

“These increases drive the fares up and our customers complain. They can’t afford it and when we have fewer customers, I earn less at the end of the day. We don’t really have a choice in the matter but I think government should do something — I am not sure what but they should do something,” he said.

Temporary reprieve
In the face of tough times it may not be all doom and gloom as Christmas nears.

Gina Schoeman, senior economist at Absa Capital, considers there to be a possibility of a drop in the petrol price at the beginning of December this year based on how South Africa’s exchange rate performs.

“If the rand can drop to a level of around R7.50 to the dollar, we can expect the petrol price to drop to a level of around R10.30. But this all depends on the ability of a rebound from a possibly stronger rand and where international oil prices go,” Schoeman said.

The rand, however, has followed a downward trend against the dollar for past few months after dropping to R8.495 in September — its lowest level in over two years against the greenback.

For those believing the current surge in fuel prices are a fad that will pass with time — think again.

Avhapfani Tshifularo, executive director at the South African Petroleum Industry Association believes motorists should brace themselves as fuel costs won’t decrease significantly any time soon.

“I don’t see us ever moving back to the prices of the 1990s, where fuel costs stabilised for a number of years. Motorists should get used to these increases and in the long-term expect prices ranging from R10-R15 a litre,” said Sibiya.