September fuel price spike to hit companies, consumers

September fuel price spike to hit companies, consumers

Chantal Marx, head of investment research and content at FNB Wealth and Investments, has warned that some companies will see a drastic increase in operating costs due to the spike in fuel prices.

Motorists waiting to fill their cars up with fuel
Motorists park their cars at a service station waiting to fill fuel/Twitter/@mailandguardian

These increases will ultimately be passed on to consumers.

The Department of Mineral Resources and Energy on Monday announced that both grades of petrol will increase by R1.71 per litre from Wednesday.

Diesel will increase by R2.76 (0.05% sulphur) and R2.84 (0.005% sulphur) per litre.

The price of illuminating paraffin will increase by R2.78c at wholesale and R3.70c per litre at retail level.

LP Gas will increase by R2.26 per kilogram.

Marx says there is a possibility that food retailers could pass these increases onto already-struggling consumers.

She says one of the few beneficiaries of the higher fuel price is SASOL, with the energy and chemicals multinational benefitting from a weaker rand, and higher oil and fuel prices. 

"SASOL share price has strongly underperformed the rand oil price over the last while. It is regarded as attractively priced at the current levels. The company stock is considered to be high-risk, and there are several uncertainties attached to the long-term investment thesis. Investors can also consider oil exposure through international companies, particularly if they already have hard currency, seeing as the Rand is quite weak," said Marx. 

Northwest University economist Waldo Krugel said the increase in fuel prices is going to put more pressure on particularly vulnerable households that spend a large portion of their income on transport and food. 

"Consumers have been struggling with higher interest rates and higher inflation, putting pressure on their household budget. There has been some relief with the reduction in inflation over the past months, but today's furl price will put more pressure on vulnerable households. This comes at a bad time when everything that is transported is going to become more expensive, and we are on stage 4/5 load shedding where diesel generators are running more hours a day.”

At the same time, FNB’s Ester Ochse urged consumers to mitigate the impact of higher prices by doing their research on where to find the lowest prices.

Ochse advised consumers to look out for specials and cook in bulk and freeze in portions, as this will help save money in the long run.

"Consumers should do a monthly shopping for their non-perishable items. Create a weekly menu using items that you have in your cupboard, and supplement it with a few fresh items. Following a more plant-based diet will definitely be a little bit of a relief in the pockets. Watch out for popping into the corner store to get one or two things, as these are normally quite expensive.”

The price increases in fuel are due to higher international oil prices and a weaker rand.


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