Nicolette Dirk and Angelique Ruzicka, Justmoney.co.za
Just before Christmas holidays, motorists will have to face another petrol price hike which is set to kick in at midnight. Petrol will increase by 17 cents a litre, diesel by 10 cents a litre and illuminating paraffin by 16 cents a litre.
At the time of writing, some petrol stations have already experienced petrol shortages as motorists race in to have their cars fuelled up before the petrol cost hike comes into effect from tonight.
According to the Department of Energy, petrol margins are adjusted on an annual basis in December and this year, the margins are adjusted in accordance with the wholly implemented Regulatory Accounting System as approved.
The increase comes as e-tolls for Gauteng motorists opened up in the same week. Opposition parties including the Freedom Front and the Democratic Alliance have been fighting to halt the project.
But last ditch attempts to stop the e-toll project from going ahead have proved fruitless and frequent users of the Gauteng freeways could pay as much as R450 per month.
Direct Axis, the financial services specialist firm, pointed out that South Africans don’t pay the most when it comes to toll fees. “Unbeknown to many motorists, South Africa has the lowest eToll cost if compared to other countries like the US, Australia and the UK.
In South Africa, the average cost per kilometre for someone with an e-tag driving in a standard light vehicle is R0.30 and a daily commute of 80 kilometres on Gauteng roads will add an extra R24 to the daily travelling costs of motorists, around 11.9% of their daily income.
Based on the same distance, motorists driving on UK’s M6 will have to fork out R165 per trip. In the US and Australia, the same daily trip will cost motorists R146 and R258 respectively – significantly more than in South Africa,” the company said in a statement.
Is the petrol increase reasonable?
Dr Azar Jammine, chief economist for Econometrix, said the increase is greater than expected.“Based on the average under-recovery in the price of petrol over the past month, one had anticipated that the price might rise by no more than 9c a litre.
The main reason why the price is to rise by much more than that is mainly because of a change in the manner in which retail and wholesale margins as well as other smaller elements of the petrol price are made up,” he said. But despite the petrol price increase being larger than anticipated, Jammine said the impact upon inflation is likely to be fairly small.
“In December last year, the petrol price was reduced by a modest 9c a litre. This means that on a year-on-year basis, the petrol price is due to rise by 26c a litre.
This will result in an increase in the year -on-year petrol inflation rate of 2.3%, to 10.1% for December, from 7.8% in November. Bearing in mind that petrol has a weighting of 5.68% within the overall Consumer Price Index (CPI), this will add 0.13% to the overall CPI inflation rate,” said Jammine.
He added that this is not particularly significant in the broader scheme of things, suggesting that consumers will be spending R1.30 more out of every R1000 on petrol.
“To some extent, the increase in the petrol price due this week will neutralise the impact on inflation of the 28c per litre reduction in the petrol price at the beginning of November,” said Jammine.
Can consumers expect further price hikes?
It is difficult to forecast petrol price movements in the year ahead. Probably the best bet is to base one's assumptions on the petrol price rising in tandem with the overall CPI inflation rate, by around 6% over the coming year.