Expect more petrol price increases in South Africa over the coming months

South Africa’s petrol price increases of R1.21 per litre on Wednesday puts petrol inflation at 33.9% year on year, says Kevin Lings, chief economist at Stanlib.

With electricity inflation also at 14%, South Africa’s energy cost is now far outpacing incomes, he warned, adding that access to reliable and affordable energy sources is critical for South Africa’s economic success.

Speaking to radio station 702, Lings said that the considerable petrol price increases seen earlier this year didn’t have as significant an effect on households, as people weren’t travelling as much due to lockdown restrictions.

“There’s obviously a huge price effect that we’re now going to have to deal with more fully because we’re obviously trying to open up the economy and we’ve got the prospect of a bit more domestic tourism, people moving down to the coast for holidays,” he said.

Based on current metrics, Lings said that another increase was likely in December.

“Unfortunately, given where the currency is right now, there would be next month another increase of around 50c a litre if the oil price stays where it is, and the currency stays where it is. That would take us to R20 a litre.”

“If you’ve got electricity at 14% inflation and fuel at 34%, those increases are well in excess of any household income or business activity growth.”

Once SA’s petrol price increases by R1.21/l on Wednesday, petrol inflation will be 33.9% year on year. With electricity inflation at 14%, the cost of energy in SA if far outpacing incomes. Access to reliable and affordable sources of energy is critical for SA’s economic success

— kevin lings (@lingskevin) November 2, 2021

The Automobile Association of South Africa (AA) has also warned that R20 a litre is likely on the cards before the end of 2021, with further increases expected in the coming months.

“With oil demand buoyant and supply lagging, the ongoing issues with natural gas cost and supply, and refining costs a worry, we see little cause for optimism.

“Added to this is the volatile rand/US dollar exchange rate, and users of liquid fuels in South Africa are probably in for a rough ride in the next three to six months,” the AA said.

Read: It’s time to change how South Africa’s petrol price is calculated