Consumers to suffer most as petrol price hikes take toll

Lee-Anne Butler

CONSUMERS and businesses will continue to feel the pinch as most experts predict no relief from rising petrol price hikes.

The price of petrol rose by 39c in December, 17c last month and a further 39c at midnight on Tuesday, pushing it to its highest ever price.

Port Elizabeth economist Dr Neil Bruton said the increase would put additional pressure on household incomes and this would affect retail sales.

"Businesses will have to cut costs. They can't really transfer them to the consumer who is under pressure, so the only solution will be to look at other methods of cost cutting," he said.

He said the situation did not bode well for job creation targets as most businesses would not hire additional staff.

"This is likely to last for as long as the rand remains under pressure," Bruton said.

Nelson Mandela Bay Business Chamber chief executive Kevin Hustler said the challenge for every business facing rising fuel costs was cost containment to remain sustainable.

"For instance, if you are in the transportation business it will not be as easy to save on fuel but then you should look at transporting more efficiently and effectively or look at other input costs," he said.

Hustler said businesses needed to become more creative and innovative at saving input costs.

"In a lot of cases, the consumer will bear the brunt of increases as the business will not be able to carry it alone. Costs will be transferred to the consumer and luxury items will take a back seat as personal budgets will be cut to focus on necessities."

Econometrix director and chief economist Dr Azar Jammine said the average consumer used only 5% of monthly spending on petrol and the petrol price had declined significantly from August until November.

He said if the rand remained weak at R11.10 to the dollar and the price of a barrel of oil remained at R106, there was a possibility of a further 10c increase in the next three weeks.

"However, there are chances that the oil price could drop, although it is too early to be conclusive.

"We should also remember that last year in February the petrol price increased by 41c/l, meaning the inflation rate is likely to fall because this latest increase was only 39c."

Jammine said it was not all doom and gloom as most average consumers would receive annual salary increases and these were likely to combat any impact caused by petrol price increases.