SA fuel price jumps, adds to inflation worry

JOHANNESBURG – South Africa’s retail petrol prices will jump by around 11 per cent on Wednesday, potentially adding to inflationary pressures and weighing further on the country’s ailing current account.

The minerals and energy department said on Friday the retail price of the most used 95 unleaded petrol grade in the Gauteng province, which includes the financial hub of Johannesburg, would go up 68 cents to 6,67 rand a litre. “The increase is by far the highest ever in percentage terms and nominal terms, and it will definitely have quite an impact on the whole economy,” Mike Schussler, economist at T-Sec.Coastal provinces – which often pay less because they are closer to refineries – will fork out 6,43 rand for the same grade of petrol.Grades 91 and 93 would go up by 69 cents to 6,51 rand and 6,54 rand a litre respectively.Wholesale prices for diesel with a sulphur content of 0,005 per cent will increase by 37 cents, while diesel with a 0,05 per cent sulphur content will rise by 38 cents.The wholesale price of illuminating paraffin – a source of fuel for millions of poor South Africans – will rise by 30,9 cents.Analysts have said mounting food prices and fuel costs will heighten the chances of higher interest rates in coming months.Fuel alone makes up about 4,7 per cent of the main CPIX inflation index targeted by the central bank for monetary policy.The last time South Africans paid nearly as much was in September last year, when the international oil price was trading around US$80 dollars a barrel.The use of petrol and diesel has increased in South Africa as it embarks on a multi-billion dollar infrastructure investment drive.At the same time, there has been a boom in new car buyers as the black middle class expands rapidly and purchases vehicles to make up for a gap in public transport.”The impact on inflation will certainly be felt.Even though transport does not have a big weighting on the CPIX basket, you have to double that when you consider its indirect effects,” Schussler said.Central bank governor Tito Mboweni earlier this week said oil imports were weighing heavily on the current account and posed a challenge if they continued at the same pace seen in the fourth quarter of last year.Nampa-Reuters”The increase is by far the highest ever in percentage terms and nominal terms, and it will definitely have quite an impact on the whole economy,” Mike Schussler, economist at T-Sec.Coastal provinces – which often pay less because they are closer to refineries – will fork out 6,43 rand for the same grade of petrol.Grades 91 and 93 would go up by 69 cents to 6,51 rand and 6,54 rand a litre respectively.Wholesale prices for diesel with a sulphur content of 0,005 per cent will increase by 37 cents, while diesel with a 0,05 per cent sulphur content will rise by 38 cents.The wholesale price of illuminating paraffin – a source of fuel for millions of poor South Africans – will rise by 30,9 cents.Analysts have said mounting food prices and fuel costs will heighten the chances of higher interest rates in coming months.Fuel alone makes up about 4,7 per cent of the main CPIX inflation index targeted by the central bank for monetary policy.The last time South Africans paid nearly as much was in September last year, when the international oil price was trading around US$80 dollars a barrel.The use of petrol and diesel has increased in South Africa as it embarks on a multi-billion dollar infrastructure investment drive.At the same time, there has been a boom in new car buyers as the black middle class expands rapidly and purchases vehicles to make up for a gap in public transport.”The impact on inflation will certainly be felt.Even though transport does not have a big weighting on the CPIX basket, you have to double that when you consider its indirect effects,” Schussler said.Central bank governor Tito Mboweni earlier this week said oil imports were weighing heavily on the current account and posed a challenge if they continued at the same pace seen in the fourth quarter of last year.Nampa-Reuters