Fuel price down, but other expenses up?


With the South African petrol price experiencing a sixth consecutive decline, can consumers feel financially safer paying at least R4 less for a litre of petrol?

Last year this time, consumers were reeling with the news of an increase to the petrol price that pushed it up to R13.60 a litre. This year, motorists can breathe a temporary sigh of relief with the Department of Energy’s announcement that petrol will decrease by 93c a litre on Wednesday. The decrease means that 95-octane petrol will cost R10.31 a litre, which, according to economist Kevin Lings, is the lowest price since September 2011.

“This is the sixth consecutive monthly decline in the fuel price. Since peaking at R14.33 a litre in August, the South African petrol price has dropped by R4.02c a litre,” he pointed out.

“The latest reduction in the fuel price is due to the lower international oil price. In fact, on its own, the lower oil price would have resulted in the petrol price falling by 96c a litre this month,” Lings said.

With a 30 percent dip in the price of petrol since this time last year, a South African motorist who paid R2,176 to put 160 litres of petrol in his/her car at that time will now pay R1 649.60 for the same amount.

But despite having extra disposable income, DebtBusters chief operations officer Benay Sager warns consumers to be cautious.

“Judging by the global activity, oil sellers in the Middle East are reducing oil prices to get a bigger market share. The current prices are temporary, and oil prices could increase to $60 a barrel by the end of the year. You might be saving a few hundred rand a month, but consumers should also remember that retailers don’t easily bring down prices when the price of petrol decreases, because they want to make a profit,” he said.

According to Lings, the current benefit of lower petrol prices could be partially offset by an increase in taxes announced in this month’s Budget speech.

“In addition, the cost of electricity is scheduled to rise by nearly 13 percent by the middle of the year, which will also dent the oil price benefit,” he added.

But while things are looking good for consumers’ disposable income, financial adviser Paul Roelofse said the extra money should be ploughed into reducing debt.

“If you divert the savings into your high-interest debts, you squeeze out even more savings because you earn the same rate of interest off the debt.

“So, if your credit card balance is costing you 22 percent a year, then you effectively save this on interest over a year. Where else can you get a 22 percent guaranteed return on an investment?” Roelofse asked.

Source: iol