Petrol has become an indispensable part of our daily lives, and we can’t imagine life without it. But in the past 12 months the price of petrol has skyrocketed, and this is bad news for our pockets and for the economy. In South Africa, all major sectors, such as manufacturing, production, transport and agriculture rely heavily on fuel. In the event of price hikes, these sectors increase their prices accordingly and it is this knock-on effect that escalates the cost of living. What this means is that over and above paying more to fill our tanks, petrol price increases affect everything we use on a day-to-day basis. For example:

Food prices rise

The food and grocery sector is where we get hit the hardest when the petrol price increases. The food industry relies heavily on fuel, from the tractors on the farm through to distribution lorries. As the cost of petrol increases, the cost of getting basic necessities, particularly food, goes up too.

Consumer goods cost more

Petrol is the highest running cost in production. Fuel price increases push freight costs up, which are then passed on to the consumer.

Public transportation fares increase

Taxi and bus fares increase, and, even if petrol decreases in the future, it is highly unlikely that fares will also decrease.

Small and medium-sized enterprises (SME) are under pressure

The substantial fuel increase poses a serious cash flow test for SME’s that are often run on very tight budgets. Business owners face the difficult decision of whether to pass the higher production and service costs on to clients at the risk of potentially losing them and causing the business even more harm.

Entertainment costs more

It’s a natural knock-on effect: Restaurants and cafés need to pay more for the products they provide, and increase their prices to cover their expenses.

The rental property market is affected

There is an increased demand to rent near to schools and business districts, as well as for more affordable rentals.

The bad news is that we are likely to feel the pinch for a long time, and some hard-pressed SME’s won’t make it. This is true even if the petrol price decreases in the near future. The cumulative impact of the higher transport costs along the supply has far-reaching consequences: It is a vicious cycle whereby a weak economy results in rising petrol prices, which in turn harms the economy even more.

Sources used and further reading

This is how the petrol price hike affects you
How the rising petrol price will affect your pocket
Fuel price increase: How it affects you
Petrol price increase: Experts explain how it could affect you and your wallet.

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