South Africa: Rising Fuel Price Will Have Domino Effect On Cost of Living, Say Experts


The cost of food, clothing and electronic goods is expected to rise shortly in response to the steep increase in the price of petrol and diesel.

As widely expected by economists, the fuel increases this month are steep, with petrol climbing by R1.71 a litre while the cost of diesel goes up by between R2.76 and R2.84 a litre. Experts say this will cause a domino effect, increasing consumer costs across the board.

The Automobile Association (AA) says the increases are largely driven by higher international oil prices which have risen on the back of slow demand and decreased output. Reuters reports that analysts expect Saudi Arabia, the world's biggest oil exporter, to extend its voluntary output cut into October, keeping oil supply tight and prices high.

According to Central Energy Fund (CEF) data, higher international oil prices are contributing between 80% and 88% to the expected increases with the weaker rand/US dollar exchange rate contributing the rest.

"While the rand has weakened on average against the dollar in August, it's not a major contributor to the expected increases. [Rather, that] falls squarely on rising international oil prices," the AA says.

Both the AA and the labour federation Cosatu hailed the recently published Review of administered prices in South Africa: The petrol price, by two senior economists at the South African Reserve Bank. The document calls...

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