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SA's petrol price horror

Sep 17 2013 09:43 Adriaan Kruger

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Port Elizabeth - Everyone knows the petrol price is high, very high. And most people know that the weak rand and high crude oil prices are to blame. But we do not always realise the full impact of the increase in fuel prices over the last few years because we tend to focus on the price at the pump for only a few minutes when prices change.

We’d rather try to forget that petrol used to cost less than R2.00 per litre up until the beginning of 1998.

Yes, that is right: Within 15 years the price of fuel has increased by more than 560%. That equals to an increase of nearly 14% year after year. Even this average increase of 14% per year does not sound so bad, until we realise that our salaries did not increase that much every year.

Effectively, we are spending a larger proportion of our salary feeding the pile of steel and chrome in the garage.

If we use the same figures the friendly people at South African Revenue Service have used for years as a guideline to calculate tax on travel allowances – 30 000km per annum  – and an average fuel consumption of around 10 litres per 100km, every motorist’s fuel bill has increased to about R 3 375 per month. 

This compares to R1 015 per month ten years ago when petrol was R4.06 per litre and R1 980 three years ago when the price was R7.92 per litre. Within 3 years our monthly expenditure on fuel has nearly doubled. Once again, our salaries did not.

Unfortunately, petrol is a necessity. And there are no substitutes for the stuff. We still need around 200 to 250 litres every month to get to work and back and to fetch the kids from school.

The result of higher petrol prices is simply that everybody had to reduce spending on other things to pay the extra R1 500 per month for fuel.

Latest results and commentary by almost all SA retail groups mention the fuel price as one of the main reasons for lower growth in sales. Gareth Ackerman, chairperson of Pick n Pay, recently referred to “the devastating effect of the increase in the fuel price on consumers’ disposable income”.

The Reserve Bank has identified higher fuel prices as the biggest source of inflation. This deals the SA consumer a second blow. Not only did the increase in the cost of petrol cut deeply into our disposable income, but the little we have left buys much less because of higher inflation.

The overall numbers are huge. South Africans use more than 20 billion litres of petrol and diesel every year. If we assume that half of this is used by private vehicle owners, then households in SA are currently spending nearly R60bn more on fuel every year than 3 years ago.

In total, SA citizens have some R5bn per month less to spend on food, clothing and entertainment.

Unfortunately, things will not change while the oil price remains high and the rand stays weak. Let’s hope a cold winter in the northern hemisphere won’t push oil prices even higher.

- Fin24

*After chasing money on the JSE for 15 years, Adriaan Kruger is now living a relaxed lifestyle in Wilderness and lectures economics part-time at NMMU.

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