Henri Du Plessis
2 December 2008
Motorists and consumers stand to benefit from the largest fuel price cut ever in the country, but the price of diesel continues to be a point of concern.
At midnight on Tuesday petrol prices will drop by R1,61 a litre and the price of diesel by 80 cents as the state cuts fuel prices on the back of a worldwide drop in crude oil prices.
But the fact that diesel was more expensive than petrol remained a concern, said Tony Robinson of the Cape Regional Chamber of Commerce and Industry.
"The price cut is very good news. It is good for inflation, which should come in at under 11 percent as a result and make room for an interest rate cut in December," economist Mike Schussler said.
"It is the biggest-ever fuel price cut at 18 percent and it is the first time in 15 months that we've had a situation where the fuel price is lower than it had been a year before.
"It is possible, considering current conditions, that we could see another fuel price cut of between 30 cents and 40 cents in January. I estimate that this would put about R2,4-billion back into the pockets of consumers and business."
Schussler said with the retail, wholesale and manufacturing sectors having taken a serious knock due to the global economic slowdown, the news was good for the festive season.
Robinson said the chamber found it absurd that the price of diesel, a fuel that was cheaper to produce than petrol, remained more expensive than petrol in this country.
"Diesel is the fuel of food production and commercial transport. This country has moved to road transport in dramatic fashion and this depends on diesel. Now we find that the more luxury fuel, petrol, costs less than diesel," he said.
Chamber manager Albert Schuitmaker agreed.
"It is an issue that needs to be taken up, as business depends on diesel for delivery of goods around the country," he said.
Schuitmaker said he had no doubts that businesses in a fully competitive environment would have to pass any savings they made on fuel costs on to the consumer, by way of lower service and product costs.
"But one must also keep in mind that many businesses had in fact absorbed fuel price increases in order to be competitive and for those who did so, it won't be possible to reduce prices," he said.
Retail giant Pick n Pay said it would pass on any savings or drops in prices from suppliers and manufacturers to consumers.
"Fuel makes up only a small percentage of the overall manufacturing price of products. Other major components include the increased cost of labour, electricity, packaging and raw material (maize, wheat, oil and beans for example, have doubled in price in recent months), to name a few," said Pick n Pay financial director Denis Cope.
"This is compounded by the fact the weakening rand and higher interest rates have placed manufacturers and growers under extreme pressure and they have not been in a position to drop the prices they charge retailers," he said.
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