Consumers dig deep into their pockets due to the looming petrol hike
Fuel is an essential source of energy in the modern world and serves as the lifeblood of economies.
People and businesses depend on fuel for their daily lives, production, and trade. Therefore, fluctuations in fuel prices have significant effects on economies.
Economists in the country and fellow members of the public have projected that consumers might have to dig a little deeper into their pockets due to the looming petrol hike, slated for May.
Worth mentioning is that fuel prices are a dynamic factor that has a substantial impact on the world economy. These prices directly affect both consumers and businesses in their daily lives and operations.
Brace yourselves
The Central Energy Fund (CEF) has advised motorists to brace themselves for another petrol hike despite the positive moves for global oil prices.
According to the CEF’s latest data, petrol prices are expected to increase by about 35 cents per litre from May 1, while diesel prices will likely drop around 30 cents per litre.
Due to the geopolitical tensions and OPEC+’s supply cuts, oil is still around 12 per cent higher this year tightening the market, even though tensions appear to be dissipating. Economist and Professor at the University of Cape Town Sindisiwe Thwala said, the role of fuel in key sectors such as transportation, industrial production, and agriculture further amplifies the impact of fluctuating energy costs on economic stability.
This is why in this article; we will delve into the effects of fuel prices on the economy in more detail and explore why these prices experience fluctuations.
Fuel prices directly affect consumer spending. High fuel costs can strain the budgets of drivers and households.
Restrict
This may lead consumers to restrict their other expenditures, negatively impacting economic growth. Additionally, high fuel prices can pose a greater financial burden for low-income families.
Fuel prices can indirectly affect employment. Businesses operating in the transportation sector may respond to high fuel costs by reducing staff or limiting wage increases. This can lead to higher unemployment rates or wage stagnation.
Thwala when elaborating on this said fuel prices are a significant factor that directly affects a country’s economy.
“These prices impact both consumer spending and business costs and have effects on macroeconomic indicators such as inflation, employment, and foreign trade,” said the Professor.
She further said fuel prices determine the daily travel and transportation costs for vehicle owners. High fuel prices lead to increased expenses for drivers and can strain individuals’ budgets.
Take for instance long-distance travel, holidays, and business trips can become more expensive due to high fuel prices.
Another impact that may be caused by high fuel prices is the impact on consumer spending. For many car owners, rising fuel costs can restrict their other expenditures. This can, in turn, reduce consumer spending and negatively affect the economy.
One member of the public said for them the constant rise in fuel prices often leads to an increase in inflation.
Elevate
“The rise in transportation and logistics costs can elevate the consumer price index and reduce households’ purchasing power,” said Sandile Mthembu from Mahwalala.
A taxi driver ranking in Mbabane said when there is a fuel hike, there is always a shift towards alternative transportation modes.
“These high fuel prices can steer people toward alternative transportation modes. There may be a growing tendency to opt for more economical options such as public transportation, cycling, walking, and ride-sharing services,” said Sifiso Ngcamphalala.
While analysts perceived these inflationary pressures as largely transitory in advanced economies, reflecting pandemic-related supply-demand mismatches and a base effect from a recovery in commodity prices; in emerging and developing countries, they are likely to persist owing to higher oil and food prices and exchange rate depreciation as explained in the IMF, documents for 202.
Consistent
It broadly states that active supply management by oil-producing countries should always be consistent with the rising oil prices that lead to intensified inflationary pressures, as this could trigger an early tightening in global financial conditions with significant downside risks.
In reaction to these projections, Eswatini’s Ministry of Natural Resources Communications Officer Sikelela Khoza said the Ministry through the Energy Department conducts monthly monitoring and reviews on fuel prices, guiding on which direction to take.
“Therefore, the Ministry will alert the public through your esteemed publication to the likelihood of fuel adjustment in May,” Khoza said.
Bloomberg reported that the under and over-recoveries in fuel prices have experienced a volatile week in both the global oil and forex markets with the former swinging wildly on uncertainties around tensions in the Middle East.