Durban - The AA and economists have predicted a major fuel price increase for petrol and diesel for next month, and added that the hikes could drive up inflation and result in an interest rate increase.
Layton Beard, spokesperson for the AA, said: “According to the Central Energy Fund’s data, petrol is facing increases of between R1.41/litre (for ULP93) and R1.45/l (for ULP95), while diesel could climb by as much as R2.60/l and illuminating paraffin by R2.55/l.”
Beard added that if such increases were implemented, it would be the highest price hikes since December last year.
“For ULP95 users in Gauteng, the increases will result in a price point of around R24.28/l for fuel, and it will cost about R1 335 to fill a 55-litre car. Filling the same car at the coast will cost around R1 311.”
Beard said the surge in prices would pile pressure on all diesel users across sectors, including agriculture.
“Consumers should brace for increases at the till as costs are recovered through higher prices.”
Professor Irrshad Kaseeram, of the University of Zululand’s economics department, said: “A petrol price increase is forecast in excess of R1.30, and diesel in excess of R2.30. The reasons for this are the appreciating US dollar, sentiment turning against South Africa due to its continuing domestic challenges, and greater demand for developed countries’ exchange rates due to their summer holidays.
“The depreciating rand will cause the erosion of the value of the rand since most of our intermediate inputs into production come from abroad. Hence to prevent the rand erosion and to prevent the second round effects of consumer prices from rising due to fuel, the Reserve Bank is likely to raise interest rates in the near future.”
Economist Dawie Roodt said the price hikes came as the economy was under immense pressure.
“I am concerned that this will put upward pressure on inflation and with recent weakness of the rand the full effect of the fuel price has not been felt in inflation yet.
“The recent downward trend of inflation will be halted. It’s possible that the interest rate could be increased or the SA Reserve Bank (SARB) could keep the interest rate high for a longer period.”
Mervyn Abrahams the programme co-ordinator for the Pietermaritzburg Economic Justice & Dignity Group, said the fuel price increases would drive up food inflation. “The increase in food inflation will affect inflation, however we urge the SARB not to hike interest rates as consumers are struggling.”
Isobel Frye, director of the Social Policy Initiative, said: “There will be a huge impact on middle-income earners as they are struggling with the electricity prices, and now with higher food prices and inflation another interest rate hike could be possible. This would push middle-income earners into poverty.”