Recent fuel-price drops will not be felt by consumers this year.
Durban — The fuel price has taken a significant dip over the last quarter, but the reprieve at the pumps will not translate into Christmas cheer and a happy New Year for consumers.
Experts and players in the retail industry delivered a Grinch-like response, saying it was unlikely the price of food and other essential goods would drop immediately.
Prices on the SA Petroleum Industry Association’s website show the cost at the coast for 95 unleaded petrol for 2023 was R20.75 a litre in January and spiked near the R25 mark in October. It has eased to just over R22.50. Pricing for diesel maintained a similar path.
Political analyst Daniel Silke said the “hurrah” consumers hoped for at till checkout points would only materialise if fuel prices continued to dip in 2024.
“I don’t think the petrol price reductions are substantive enough to change prices of goods and services.”
Silke said only a sustained drop over many quarters would properly impact a basket of goods.
“It is now a matter of whether lower prices can be sustained, which is based on two things; the value of the rand, which has been under pressure once again this week, which is not favourable, and the global fuel price.”
He said the fuel price remained volatile.
“We can’t relax in the battle against inflation and the current cuts won’t help us meaningfully.”
Silke highlighted logistical bottlenecks in the economy, like Transnet’s recent R47 billion government bailout, and the energy crisis, causing food producers to spend extra on generators and other survival necessities to mitigate Eskom woes.
“They all factor into the inflation rate.
“The recent fuel price cuts won’t produce a lasting hurrah because it is too late and relatively insignificant over a short period of time,” he said.
Automobile Association spokesperson Layton Beard said the fuel price cuts were good for travellers to places like KwaZulu-Natal, but companies and producers of food had their own methods for cost calculations.
“When the price of diesel increases, the cost of almost everything goes up, but you don’t see the adjustment after decreases.”
Beard confirmed that businesses would want to “wait and see” if the decrease in fuel costs continued over a period of time.
“There’s no point in decreasing for a month when you have to put up your prices the next month,” said Beard.
SA Canegrowers Association CEO Dr Thomas Funke said growers were pleased with fuel price dips, as they were now finalising their operations for 2023 because they contended with higher prices during the peak periods of the sugar growing season.
Funke said farmers’ fuel expenditure and transporting cane represented about 12% of a grower’s expenses. Staff (more than 30%) and fertiliser (about 15%) were the other big cost factors.
“When fuel prices increase, growers absorb this cost in the harvesting and transport of their cane to the mill. Small-scale growers are most affected because they rely on contractors to harvest and haul their cane, which reduces the margins. Similarly, increasing costs forces large-scale growers to cut costs elsewhere.”
Funke appreciated that global and domestic sugar prices were good in 2023, which ensured growers covered their overheads in spite of some severe cost increases.
Spar Group’s national merchandise executive Robert Brink said they were committed to providing shoppers with the lowest prices, but the group and store owners faced various external factors that impacted their commitment.
Brink said manufacturers imported goods and raw materials in advance.
“Therefore, even the current fuel price decreases left suppliers still recovering costs incurred during the initial procurement or distribution of these items, before the fuel price drops.”
While Spar constantly monitored prices, Brink said, the factors currently influencing pricing dynamics were largely outside their control, leading to unfortunate food prices increases.
In a statement, Pick n Pay said: “We continuously invest in our pricing so that, whenever possible, we avoid passing any supplier increases to customers. While fuel is a relatively smaller part of food costs, any drop in costs from our suppliers is passed to our customers.”
Competition Commission spokesperson Siyabulele Makunga said while external factors changed, they had not seen price reductions yet.
He said consumers dissatisfied with the pricing of goods were welcome to lodge complaints via their website.
Sunday Tribune