Massive fuel price increase to hit poorest hardest

The exorbitant price increase of fuel will mostly affect the poor in SA as prices are expected to increase again in December, experts have warned.  

According to the minerals and energy department, the price of petrol will go up R1.21/l, diesel by R1.48/l, illuminating paraffin by R1.45/l and LP gas by R2.90/kg. 

Petrol will be sold at a record high R19.54/l.

Chief economist of Efficient Group Dawie Roodt said the sharp increase was due to a weaker rand and high international oil prices. “I think chances are good that we will see another increase next month,” he said.

Roodt said although oil prices might fall soon, the rand could still depreciate, affecting fuel prices negatively. “I think petrol will go up a bit next month (maybe to R20) then down again early 2022, but by middle 2022, I expect the rand to weaken driving petrol up again,” he said.

However, economist Kevin Lings from Stanlib said although the price of petrol was high, the overall inflation rate was not the highest we had seen.

“This is not the highest annual inflation rate petrol has experienced. As recently as May 2021, petrol inflation was 41% year over year (y/y), while back in July 2008, it reached 49.8% y/y. The difference now is that petrol inflation has been sustainably higher for a number of months, averaging 25.8% y/y over the past eight months – this has not occurred since 2008.

“It seems likely that the petrol price will rise again next month. This is partly because the rand has weakened more recently, while at the same time the oil price has remained high.”

University of the Free State economist and lecturer Dr Gibson Mudiriza agreed, saying the price increase does not always affect the price of food and public transportation but may increase this time because of the sharp price difference.

“In this particular instance I think the margins they are talking about are too high and the probability of food prices increasing are high,” he said.

He said the price of fuel would affect both rich and poor but poor people would pay a disproportional amount of their income on transport compared to their rich counterparts. “At the end, the poor households are the ones who will be affected the most,” said Mudiriza.

Meanwhile, taxi associations in Gauteng said they would be meeting to find a way to review fees to try to make concessions to protect customers from bearing the brunt of exorbitant petrol and diesel price increases.

National Taxi Alliance spokesperson Theo Malele said taxi owners were already struggling due to the pandemic.

“These are unprecedented times and the way in which fuel prices have gone up by shooting through the roof is going to have a negative impact on us. Maybe government needs to consider reviewing the levies, I mean the fuel levy is at 19% and we also have the Road Accident Fund and the inland demand levy at 11%, and others at 2% and so forth and so on. These levies contribute almost 52% of the actual cost of fuel and fuel is only 48% thereof,” said Malele.

“The taxi industry will have to be considerate when adjusting its tariffs.”

South African National Taxi Council spokesperson Midday Mali said they would meet as a council to see the way forward.

“This petrol increase has a bad impact on us. It is fully going to affect our operators and commuters but what we will do as a province in Gauteng is not just increase the prices but make sure we conduct a meeting with the five regions in the province and find out their ideas on a fair increment,” he said.

Motorists park their cars

Motorist Mogale Maleka is planning on walking and cycling more to preserve his petrol after the price increase today, which will see him pay a record high R19.54/l. Maleka, 28, from the Vaal, said he would cut visiting home in Limpopo to save money.

“The petrol price is unsustainably high and seems to keep increasing. It comes as a huge shock and will definitely result in me using my car less,” he said. “I used to go home every three months but now I will go for more important events.” Another motorist Tebogo Maja, 42, said he was worried that he would not be able to visit his wife and children as much.

“I hardly use my car for work already. I keep my car at home to save money so that I can go home in Limpopo at least twice a month. Now I’m really worried,” he said.

Co-founder of delivery business Thuma Thina Delivers, Bianca Mvelase, said their business, based in the Western Cape, which delivered goods such as groceries and takeaways, would be affected to some degree but that they would take advantage of the increases to get access to more customers who wanted to cut down on petrol.

“It will somewhat work to our advantage because people will be more hesitant to drive places to go and order a takeout and rather will get deliveries, especially if it is far,” said Mvelase.