Recent snapshots from the Central Energy Fund show that next week, 95 Unleaded petrol is looking to increase by R1.60 per litre, while diesel could rise by about R2.75/litre.
I genuinely don’t know how people are expected to cope.
But while we have also just become accustomed to accepting these petrol hikes, many still don’t know what makes the price of fuel rise or drop.
What determines SA’s monthly fuel costs?
The rand/dollar exchange rate and international oil prices primarily govern domestic fuel costs in South Africa.
On the first Wednesday of every month, based on these two factors, the fuel price is adjusted.
How does the rand affect the fuel price?
The weaker the rand, the higher the fuel price – and South African consumers are currently facing the brunt of a weak rand.
The rand took a beating in August and went to R19 to the dollar.
There are many reasons for the rand’s poor performance recently, namely;
– Load shedding
– Low consumer sentiment
– Risk averse global markets
– Low growth in the economy
– Taxi strikes
How does the oil price affect the fuel price?
As global markets have seen stronger demand, oil prices have shot up in August while supplies have been cut short.
Prices have moved from about $75 a barrel in July to $86 a barrel and beyond, leading to a massive under-recovery in local fuel prices.
Saudi Arabia and Russia have recently cut supplies, tightening the physical market and helping to drain inventories. This has happened while the global demand has been running at an all-time high, aided in part by Chinese petrochemical activity.
How does the increase in the fuel price affect ordinary South Africans?
When fuel prices rise, so do the costs of producing and transporting raw materials.
This results in the increase in prices of everyday necessities like bread, milk, maize, and virtually anything and everything on our shelves.
With millions of South Africans unemployed, over-indebted and/or relying on social grants, increases in the costs of basic necessities will have far-reaching negative effects on our pockets.
In South Africa, the financially vulnerable often live far away from work hubs and city centres. This means transport costs take a huge chunk out of their take-home income.
A huge petrol price increase (like the one expected in September) will most likely lead to an increase in the price of public transport.
Many people have to take two to three taxis, buses and trains to get to and from work.
Sadly, most of the people travelling with public transport will not see an increase in their salaries anywhere near the projected increase in the price of transport and other necessities.
The Automobile Association of South Africa (AA) expressed concern at the knock-on effect of the surge in the fuel price on diesel users, the retail industry and the already stretched pockets of consumers, and warns that the huge diesel price increase will eventually lead to higher grocery bills, among other things.
“These surges in prices will pile pressure on all diesel users, but particularly large users in the agricultural, retail, manufacturing, and retail sectors. Consumers should brace for increases at the till as costs are recovered through higher prices,” the association said.
Remember that the above predictions are based on unaudited data and that the outlook could change between now and month-end.
The official petrol and diesel prices for September are expected to be announced by the Department of Minerals and Energy Resources on Monday, September 4, with the actual adjustments taking place on Wednesday, September 6.
Leslene Classen from EZ Debt Solutions reports that there has been a definite increase in the number of people looking for ways to financially survive.
“We can’t really tell South African consumers to cut back – they have cut to the bone. The cost of everyday necessities is ever-increasing and rising inflation and interest rates are pushing up their monthly debt repayments.”
Leslene suggests the following if you can no longer cope with your living expenses and your debt:
– Take the time to carefully go through your expenses, and cut if and where you still can.
– Speak to people in your household and tell them that you are struggling, so that everyone can start tightening their belts.
– It doesn’t help if parents are stressed and cutting costs where they can, but children are still wanting to spend geld on unnecessary luxuries.
– Make the effort to get up to date with who you owe, and how much you owe them. Go through all the physical and digital correspondence from your creditors.
– Don’t cancel any life-altering policies without speaking to a financial advisor.
– Don’t make any major decisions regarding your debt, without speaking to a registered debt counsellor.
– Put effort into generating income from your side hustle.
For those who own vehicles, here are some tips from MasterDrive on how to reduce the effect of rising fuel costs:
– Ensure your vehicle’s maintenance is up-to-date. Not replacing certain parts in your car can considerably affect fuel consumption.
– Keeping your revs between 2 500rpm and 3 500rpm can reduce your petrol consumption by up to 20%. In diesel vehicles, the rpm can be as low as 2 000.
– Using your aircon wisely and making sure that open windows do not add to increased wind resistance will also help.
– Plan your routes. Plenty of petrol can be wasted by not making your route as efficient as possible.
– Avoid driving with unnecessary items in your car that add to the weight of the vehicle.
– Avoid idling for longer than 30 seconds.
Times are tough. But so are we. This, too, shall pass.