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Petrol price increase will impact every South African consumer

fuel

The petrol price is set to rise once again, this time in spectacular record-breaking fashion. This will have a disastrous knock-on effect on every single South African consumer, not just motorists.
The single greatest petrol price increase of all time has South African motorists and commuters fuming. This year has been an especially torrid time for the pump, with the per litre price of petrol increasing by nearly R4 across the board.

2018: year of the petrol price horrors

In March, a litre of unleaded 95 petrol cost R13.76. On Wednesday 3 October, that price is expected to soar beyond the R17 mark. With the international price of crude oil eyeing out the $100-a-barrel mark, it seems likely that South Africans could be paying close to R18 a litre before the end of the year.
South African’s find themselves running on empty, thanks to an unsteady rand and an increase in oil prices; the former, a result of internal political instability, economic recession, and a downward trend amongst all emerging markets.

While analysts and politicians attempt to make sense of the causes, the reality of local petrol price increases is beyond comprehension to local consumers. Not because of ignorance, but because its side effects are unavoidable; and sometimes, for an already embattled nation, attempting to justify the inevitable is a sadist’s game.

But, despite the cynical outlook, it’s important to be prepared – to understand that whether you visit the pumps or not, you’re still in for a shock at any checkout counter across the land.

Petrol price increase impacts the agricultural sector

Paul Makube, FNB Business Senior Agricultural Economist, spoke to 702 Talk Radio about the adverse effects this massive petrol price increase is due to have on South Africa’s agricultural sector. It should go without saying; agriculture is the lifeblood of South Africa.

In fact, according to President Cyril Ramaphosa, the only reason the nation is currently gripped by economic recession is because of losses in the agricultural sector, largely brought about by drought.

Makube puts it all on the table quite simply, saying:

“Higher fuel prices immediately, as we head into the planting period, impact on the profitability of farmers. Eventually these costs are going to filter through to the produce that they are sending out to the market.
Farmers are having to deal with higher crude oil prices… higher prices of diesel. A higher oil price also impacts on the price of agrochemicals; fertilizers, pesticides and herbicides. All of these are derivatives of crude oil.”
The reality is that mounting pressure on the agricultural sector is sure to trickle down into the consumer markets, raising the prices of simple foodstuffs, which puts further stress on low-income households already struggling to make ends meet.

South Africans will pay more for food and other goods

Naturally, commuters travelling by bus or taxi will also be expected to cough up more cash per trip, as transport associations attempt to balance profitability in the face of a mammoth petrol price increase.
Unfortunately, South Africa relies heavily on road freight to transport and deliver goods to retailers. Not only will the agricultural sector be forced to count the costs, but transport logistics companies, vital to supply chain, will have no other option but to raise service prices to counterbalance costs.
It’s this knock-on effect, which has far-reaching consequences for every single South African, which should be investigated, and potentially minimised. It’s a vicious cycle whereby a weak economy results in rising petrol prices, which in turn harm the economy even more.

Luke Daniel, The South African, 2 October 2018

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