Experts expect diesel price hike in May

IF CURRENT price trends persist, the price of petrol could come down by about 20 cents a litre, while diesel would increase by 80 cents or more next week.

This is based on the latest data released by the Central Energy Fund which shows an over-recovery for the petrol price, but a fairly steep underrecovery for diesel.

Experts predict that there will be a minor decrease in the petrol price, however, it will bring little relief for struggling consumers and businesses as a steep increase in the price of diesel is expected in May.

Professor Bonke Dumisa, an independent economic analyst, said that an increase in the diesel price was possible.

“We have to attribute this to the rocketing international price of Brent crude oil and the weakened rand. Of course, this is a possible increase as the last day for monitoring the fuel and diesel price from the Central Energy Fund is today (this week). An increase in the price of diesel will affect the ordinary consumers.”

Dumisa added that a diesel price increase would have a major impact on consumers and businesses.

“Most of the trucks that deliver goods and food use diesel, farmers also use diesel, and no matter how little or how huge the increase on diesel is, we will all be affected. The businesses are the middleman and they will push the price on to the consumer. We can expect bus fare prices to increase and prices at supermarkets to be more expensive.”

He said that another concern was that the increase in the diesel price would cause a rise in inflation.

“If the inflation rate goes up it could cause the Consumer Price Index to go up and this will force the Reserve Bank to increase the interest rate as they need to control inflation. This will have a major impact on the consumer and the cost of living.”

Professor Irrshad Kaseeram, of the University of Zululand Economics Department, said consumers were already feeling the impact of exorbitant fuel prices which was putting pressure on businesses.

“We have to remember the rail infrastructure is not good and that most of the transportation of goods is being done by road, and trucks use diesel. An increase in the diesel price will cause an increase in input costs. The price of retail, manufacturing and mining will all go up because of an increase in the diesel price and this will put a strain on the economy and workers, who will demand a wage increase to match the rising cost of living. Businesses will also feel the strain of the increase in the diesel price and this will lead to more borrowing and more debt in South Africa.”

He added that South Africans had to hope the conflict in Ukraine came to an end. “The conflict is influencing prices internationally, we have to hope the war does come to an end so that international prices come back to some normalcy. In the meantime, we hope the government does step in and not increase the fuel tax, as this will provide relief to consumers and businesses.”

The AA’s spokesperson, Layton Beard, said that diesel was a huge input cost in the manufacturing, agricultural and mining sectors and an increase in the price of fuel would certainly have a knock-on effect on consumers as role-players in these sectors added these costs to their prices to cushion the blow.

“Although the unit prices of goods may increase marginally, the cumulative effect of many increases on many products will be quite hard for many, especially the poor.”

Dr Ntokozo Nzimande, a senior lecturer in the Department of Economics at UCT, said: “Transportation costs will surely increase, and that means the whole economy or all industries will feel the pain. We are still struggling to recover from the impact of Covid19, and most importantly failing to deal with Eskom issues (load shedding), these issues combined will prevent our economy from growing or recovering, at least.”