Fuel's Gold: Soaring petrol prices, what can we do?
I remember the time when I was a young professional. We all were so excited to get our first vehicle: the feel of the keys in our hands and the freedom to go wherever we wanted, whenever we wanted. Having to rely on public transport to get to university or work was a thing of the past.
Nowadays, consumers wonder if they can afford a full tank.
South Africa's fuel prices soared for diesel, between 88c/l and 94c/l at the coast, while the cost of petrol decreased by 12 cents a litre on 04 May 2022. This brought many a massive sigh of relief, even short-lived.
As we all have realised, after one month's decrease, we can expect another increase much higher than the original decrease in the following months, which can be seen by the growth expected in June.
Finance minister Enoch Godongwana announced an Emergency Intervention on Thursday, 31 March. Godongwana said this would be implemented by temporarily reducing the general fuel levy (GFL) included in the Basic Fuel Price by R1.50/litre from 16 April to 31 May 2022.
This is expected to fall away at the end of May.
The latest estimate predicts that petrol will increase between R 1.93 and R 1.97 in the first week of June; the future is looking bleak.
Local fuel prices are determined by international oil prices and the dollar-rand value, as South Africa buys oil in dollars.
The rand is currently trading around its worst levels since November last year, while Brent Crude remains close to $110 per barrel.
So, what is the impact on everyday consumers?
Higher fuel prices have a knock-on effect on South African consumers:
- Motor vehicle running costs: Vehicle owners will immediately feel the impact and pay more to fill their tanks.
- Transport costs: An increase in fuel prices means higher costs for companies to operate bus and taxi services. These costs are passed on to the consumer.
- Consumer goods: An increase in the fuel price impacts the cost of consumer products, leading to a rise in logistic costs. An increase in logistic expenses is typically passed onto the consumer. The price of an R60 hamburger will undoubtedly change.
These factors will lead to many households experiencing decreased income, and after the loss of jobs due to Covid-19, many families have only one source of income. Moreover, considering the looting and, most recently, the devastating flood, we will find many consumers struggling to make ends meet.
The impact of higher fuel prices on your investments
Higher fuel prices will result in higher inflation and may lead to increases in interest rates. Higher interest rates will hurt bonds. Rates will increase, resulting in many consumers being left in a bind again.
What can be done to help ease some of the financial burdens of the fuel increase:
1. Check your car wheel alignment; bad alignment causes more friction, takes more power to overcome and has higher fuel consumption.
2. Check for under-inflated tyres as they increase resistance.
3. Reduce the vehicle's weight by removing unnecessary items from it.
4. Service your car regularly; a vehicle can burn up to 30% more fuel if proper maintenance is not routinely performed.
5. Do several tasks on one round trip as it limits mileage and lets your vehicle run at its optimal temperature.
6. Employers should offer work from home arrangements for staff if they can work from home. This has proven to be effective during the lockdown period.
7. Carpooling – This also has a knock-on effect by reducing your carbon footprint and reducing the amount of traffic on the road.
8. Companies should review their travel reimbursing policies to ensure that it has been updated and is in line with the current requirement or offer travel allowance.