07/10/2021

Fuel and Energy Crisis Looms

Wednesday 6th October 2021: Since 2011, the cost of petrol has increased by +- 85% and diesel by +-69%. In Rand terms, this means an average 50 litre petrol tank now costs R916.50 to fill versus R495.95 10 years ago. So while consumers are paying marginally less for petrol at the pumps this month (95 decreases by 1 cent/ litre and 95 by 4 cents) – versus Diesel 0,05% and 0,005% which have both risen by a noteworthy 22,8 cents and paraffin by 32 cents/litre – on average, they are paying a lot more for petrol than they used to. This as annual salary increases remain at 6,8%. What’s more, prices for all forms of fuel are likely to continue to climb as the cost of a barrel of Brent Crude rises, with economists expect it to reach the $100 mark before the year is out. This means it is likely to be an expensive festive season for most. So says Neil Roets, CEO of Debt Rescue. 

“As we enter the last quarter of 2021, consumers will be looking ahead towards their holidays but they will be in for some steep price increases across the board as the fuel price keeps climbing, pushing inflation up alongside it. We must also factor in the likelihood that Treasury will raise interest rates to keep inflation in check which will add an additional financial burden to consumers who have experienced another year of financial hardship thanks to the continued challenges brought on by Covid-19,” says Roets. 

Consumers will also have to contend with a looming energy crisis which is impacting the world over. Notwithstanding the rising cost of Brent Crude, gas and coal prices are escalating too, which will push the price of power over the line. This follows the sharp increases in the price of electricity earlier on this year which consumers have had to contend with, following Eskom raising its cost of power to municipalities by 17,8%.  

“Internationally energy prices are going up quite steeply at the moment, the oil price is currently over $80 and some analysts are predicting that the oil price will reach $100 soon, but gas and coal prices are also through the roof, electricity prices are going up internationally and all energy prices are going up quite steeply. There are a number of reasons for that. One has to do with the world economy suddenly opening up after the lockdown, and another is the green economy, which favours gas over coal. This is causing a disruption in supply and demand – especially from Russia – and pushing prices up accordingly,” explains economist Dawie Roodt. 

For consumers, increases in these both fuel and energy will be a double-whammy disaster as goods and service providers will either need to absorb the knock-ons or pass them on to consumers. Food in particular will be hit hard as it contends with the increased cost of transport as well as the energy needed for manufacturing. 

“After 18 months of COVID, many consumers have had their financial standings compromised. This is against the backdrop of rising living costs. As the holiday seasons approaches, many will have to forgo vacations and cut down on festivities this year if they are to cope with a new year of school needs such as uniforms, books and school fees. Unfortunately, for vast numbers of South Africans, it is going to get worse before it gets better,” says Roets. 

Roets urges consumer to stick to their budgets, while also factoring in increases in the cost of food, transport, electricity and possibly interest rates and be prepared. “Should they find themselves in financial difficulty and battle to make repayments to their creditors, it may be wise to seek counsel in the shape of debt review. But for now we advise consumers to batten down the hatches and get ready for sharp cost increases across the board,” concludes Roets.

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