South African consumers will have “The Grinch” stealing their Christmas this year as the price of petrol is set to increase again on Wednesday, taking the little left from household incomes following a rise in the cost of borrowing.
According to recent studies, anxiety is on the rise among South African consumers as the high cost of living bites, driven by persistently rising interest rates imposed to curb runaway inflation.
Data from the Central Energy Fund (CEF) last week showed that the price of 93 and 95 octane petrol is expected to increase by 30 cents per litre and 41 cents litre, respectively, following a 51 cents per litre hike in November.
However, diesel is set to fall by R1.48 per litre, offsetting the R1.44 per litre increase last month.
This means the average logistics vehicle with an 80-litre diesel tank will cost R118.40 less to fill up, and 93 and 95 octane petrol tanks will cost an additional R24.00 and R32.80, respectively.
FNB Wealth and Investments senior economist Koketso Mano on Friday said the divergence seen this month was driven by an under-recovery in the petrol price and a large over-recovery in the diesel price by the CEF.
However, Mano said they expected fuel prices to gradually ease over the next year.
“The driving forces for oil prices remain consistent. Supply remains constrained and OPEC+ recently cut production targets to support oil prices and may be willing to take further steps to support prices as a global activity slowdown unfolds,” Mano said.
“On the demand side, constrained demand from China is expected to persist near-term as the country grapples with its Covid-zero policy and demand could also be impacted by slowing global growth as the impact of rising interest rates continues to filter through.
“Further weakening of the rand may place some upward pressure on local prices. We expect fuel prices to gradually ease over the next year, but to remain above pre-pandemic levels and subject to unfolding risks to international oil prices and the exchange rate.”
The global price of Brent crude oil has been declining for most of November due to escalating fears over a global economic slowdown while the rand’s recent strength provided some support to fuel prices locally.
However, the rand last week tanked on Thursday on the back of market volatility amid uncertainty about the political future of President Cyril Ramaphosa.
Nonetheless, the Automobile Association said the decrease to diesel and paraffin prices was encouraging.
“Diesel is a major input cost in many sectors and the decrease to this fuel cost is positive for all consumers,” it said..
“While positive, the suggested retail price of diesel in December will still be around R6.20 per litre more expensive than it was in January, which will have resulted in higher prices to goods and services during 2022.”
The association noted that the prices of 93 and 95 octane petrol have similarly increased over the period, although by smaller margins of between R3.60 per litre and R3.90 per litre.
“Although less pronounced than the diesel increases over the year, this is nonetheless still significant and will have negatively impact on motorists who are already facing severe financial pressures.”
Meanwhile, the Deloitte Africa State of the South African Consumer Tracker Report last week revealed that four in 10 South African consumers were anxious about their finances, while a third were anxious about the direction of the economy.
The report also said many consumers were using up their savings or taking on debt to maintain their lifestyle, with just under 70% expressing anxiety about their level of indebtedness.
At 88% of consumers, South Africans were the most concerned about price increases of everyday purchases among all 24 countries surveyed by Deloitte.
“From the outset it was clear to us that while the Covid pandemic was unfolding, there was another underlying pandemic very closely associated with it; and that was the financial pandemic,” said Rodger George, Africa Consumer Industry Leader at Deloitte.
“As we’ve been running the tracker for the past two-and-a-half years, we can see that as the concerns surrounding the Covid pandemic are starting to subside, the concerns around financial stress that is feeding into the market and into the lives of consumers is taking the forefront.”