Fuel price increase dampens outlook for festive season

AS SOUTH Africans prepare to celebrate the festive season without Covid19 lockdown restrictions, experts say that another petrol price increase will put a damper on celebrations, especially for those who will be travelling.

While there is good news for motorists with diesel vehicles and paraffin users, the price for motorists with petrol vehicles is set to rise from today by 59 cents per litre for 93 and 95 ULP and LRP, according to a statement from the Department of Mineral Resources and Energy.

For diesel 0.05% sulphur, the price will decrease by R1.57 per litre, while diesel 0.005% sulphur will drop by R1.52 per litre. The price of illuminating paraffin (wholesale) will decrease by 57c.

Economists said while the petrol price increase for December may be small, the cumulative increases will have a significant impact.

AA spokesperson Layton Beard said the prices of 93ULP and 95ULP petrol had increased between January and December by margins of between R3.60/l and R3.90/l.

“Although less pronounced than the diesel increases over the year, this is nonetheless still significant and will have a negative impact on motorists who are already facing severe financial pressures,” he said.

Beard said the AA would continue to call for a re-evaluation of the fuel pricing structure to provide longer-lasting solutions to mitigate rising fuel costs.

“A review of the fuel price must examine all the components that comprise a litre of fuel, establish their continued relevance as part of the fuel price, and determine if the calculations used are still correct,” Beard said.

Professor Irrshad Kaseeram from the University of Zululand’s Economics Department said that although the latest petrol increase was minimal, the impact of the previous increases would be felt over the festive season.

Asked about whether there may be a dip in holiday travelling, Kaseeram said some holidaymakers may have factored in the fuel price increases during planning but may have to opt for shorter trips.

“We may find that consumers who normally like to travel might not be travelling as far due to the fuel (price) increases. Overall, the tourism industry has taken a blow due to the Covid-19 pandemic, and now with the increase in fuel and rising cost of living we could find consumers with less money in their pockets and spending less on leisure activities.”

Dr Sheunesu Zhou, a financial economist, also from the University of Zululand, said fuel increases had been protracted this year.

“There’s no doubt that people are going to be affected and this is going to have an impact on tourism. There will be larger volumes of traffic due to the holidays and we are going to find people paying more for fuel and having less money.

“Also remember that with fuel going up, the price of products will go up and this will also discourage tourists from spending money and maybe even from going on holiday this December. Transport is a major driver of costs, so it’s a concern when there’s a fuel (price) increase.”

He advised consumers to be cautious with their spending this festive season.

“The burden of debt is very high for consumers and it wouldn’t be wise to spend carelessly on things that you don’t need. With the rising cost of living, we could find many consumers heading into the new year with a huge amount of debt.”