The price of petrol in South Africa has become a stark comparison to what we paid at the pumps nearly two decades ago – just R1.73 per litre! Unfortunately, the hike in fuel costs doesn’t stay there but has a major effect on consumers and the economy as a whole.
Why Do Petrol Prices Change?
Like any commodity, the price of petrol is subject to international factors that can cause its price to rise and fall. As South Africa does not produce any of its own oil, and thus has to import it, the country faces greater fuel price changes than countries that do – though even they are subject to price changes. Some causes for fuel price changes include:
- politics
- import costs
- exchange rate
- global oil production
The results of fuel price increases is the same regardless of the cause: consumers usually bear the brunt of it.
Effect of Fuel Costs on Consumers
The cost of fuel directly correlates with the cost of transport, so if the fuel price increases, transporting goods and providing services becomes more expensive. This means that, while consumers will pay more when filling up, they’ll also have to dig deeper into their wallets when purchasing groceries, clothing, and even medication – usually all consumer goods are affected by a petrol price hike.
All consumers feel the pinch when the petrol price rises, but the hardest hit are poorer communities. While zero-rated goods are exempt from VAT, no food types escape increases when the cost of fuel goes up, which means that staple foods like bread, milk, samp and maize meal cost more. Those with credit facilities then often resort to purchasing food on credit cards or with overdrafts when grocery shopping.
Those who use public transport are also more likely to be paying more as taxi drivers, bus associations and even UBER drivers raise their tariffs to cover the additional fuel costs.
Consumers are also more likely to pay more for goods provided by small businesses, as the business owners are forced to increase their prices to cover the additional fuel costs.
Effect of Fuel Costs on the Economy
Petrol price increases have a major impact on the primary sectors of the economy: agriculture, mining, manufacturing, and retail. When the cost of fuel rises, the running costs for each of these sectors increase, too. This is why food becomes more expensive, why raw materials cost more, and why manufactured goods take more from your bank account.
Apart from goods costing more, businesses often look to cut expenses – which usually mean retrenchments, layoffs and staff cuts. In a country where the unemployment rate sits at around 29%, this has catastrophic repercussions for South Africans. However, while expenses are cut, prices are increased as businesses struggle to retain their profit margins and stay afloat.
Stay Ahead with Limitless World Petroleum
A rise in fuel prices has a huge knock-on effect for South Africans, businesses and industries alike. Stay abreast of industry movements by partnering with Limitless World Petroleum, and contact us for all of your fuel needs. Learn more here.
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