South Africans are paying more for fuel after large price increases took effect on 7 October. An economist warned that the fuel price hike could also push up the cost of food, transport and doing business.
The price of petrol 95 went up by R3.33 a litre. Diesel rose by up to R3.24 a litre, IOL reported.
“Fuel is a fundamental input into almost every part of the economy. South Africa is particularly sensitive to fuel-price movements because goods, agricultural products, workers and services depend heavily on road transportation,” said Dr Christopher Ikechukwu Ifeacho.
Ifeacho is a lecturer in the Department of Public Management and Economics at the Durban University of Technology (DUT).
The Department of Mineral and Petroleum Resources said the increases came mainly from higher world oil prices. It said Brent crude rose from US$87.89 to US$101 a barrel.
According to the department, the rise followed political tensions abroad, doubts over oil supplies and higher shipping costs.
Higher fuel prices can raise the cost of moving goods from farms, factories and warehouses to shops. This can add to the price of everyday items, IOL reported.
Farming is especially exposed because diesel is used for irrigation, harvesting and moving food. But Ifeacho said higher fuel prices do not automatically mean the same rise in food prices. He said several other factors affect what food finally costs.
For families, the increase can mean spending more on getting to work, school transport and other basics. That leaves less money for other needs.
Low-income households are most at risk, because they spend a bigger share of their income on basic goods. Students who travel far to campus may also face higher costs.
“Higher fuel costs can reduce real household purchasing power indirectly through the higher prices of other goods and services,” Ifeacho said.
Businesses that use a lot of fuel may also see higher running costs and smaller profits. These include logistics, farming, mining, construction, manufacturing and retail distribution.
Ifeacho said companies can absorb the extra costs, work more efficiently or pass some costs on to customers.
“This is why a fuel-price increase can have an economy-wide effect even on businesses that are not themselves large fuel consumers,” he said.
IOL reported that fuel price increases can feed into inflation as transport and production costs spread through the economy. If the pressure lasts, it may affect wage demands and make price stability harder to keep.
Ifeacho said the bigger worry was not only the price at the pump. He said it was also how long high fuel costs lasted and how far they spread into other prices.
He advised households to plan their budgets with care and cut transport costs where they can. He suggested combining trips, planning routes, sharing lifts and using public transport.
“Most importantly, households should recognise that a temporary fuel-price shock and a sustained increase are different situations,” he said.
Ifeacho said making South Africa less exposed to fuel price shocks would need better public transport and stronger logistics systems. He said it would also need more energy sources and policies that support productivity and competition.
Source: this article is based on reporting by IOL. Image: IOL. Written with the help of AI and published by the Tzaneen Voice Business desk. See our Editorial Standards.
Anelisa Nkuna covers business and money news for Tzaneen Voice. Anelisa reports on the rand, fuel prices, interest rates, jobs, Eskom, Transnet, farming and company results. The aim is simple: explain what the numbers mean for household budgets, small businesses and workers in South Africa.