South Africans will no doubt breathe a sigh of relief in response to the news that, despite the rand crashing to a new record low of R19.90 against the dollar on Thursday, June 1, a dip in global oil prices cemented a cut in both petrol and diesel prices.
The Department of Mineral Resources and Energy announced this past week the official fuel price adjustments for June 2023, stating that petrol prices will decrease by 71 cents per litre, while diesel will be coming down by between 80 cents and 84 cents per litre from Wednesday, June 7.
This brings the price of 93 Octane petrol down from R23.01 in May to R22.30 in June, with 95 Octane dipping from R23.34 to R22.63.
However, those in the know are cautioning motorists to keep an even tighter handle on their finances and to prepare for more increases in the months to come.
Neil Roets, CEO of Debt Rescue, says, “While any relief is good news for millions of desperate motorists and commuters across the country, global and local indicators point to more steep petrol price hikes in the months to come. The June price cuts have been supported by the dropping of international product prices, driven by lower oil prices, which dropped to around $72 a barrel. This is the main contributor to the over-recovery in local fuel pricing,” he explains.
However, Brent prices could hit $100 by the end of this year, according to analysts commenting on the OPEC+ meeting held this past weekend.
OPEC's top producer and the world's largest crude oil exporter, Saudi Arabia, has said it will voluntarily reduce its production by 1 million bpd in July to around 9 million bpd to protect oil prices from sliding too low – and that this cut could be extended beyond July.
Commonwealth Bank of Australia analyst Vivek Dhar says this raises the concern that oil markets are now more prone to a shortfall later this year.
Roets says he is deeply concerned that with this prediction of more petrol price increases and the steady depreciation of the rand, consumers will just keep taking the hits financially.
“The reality is that the country’s workforce relies on both private and public transport to get to work and back. Any further price hikes will likely push many more millions of people over the edge,” he warns.
Roets notes that food inflation raced to a 14-year peak in March this year, coming in at a whopping 14%.
He cautions that while there is a small chance of a drop in food prices due to the June petrol price decrease, forthcoming hikes will lead to even higher interest rates and will see more South Africans spiralling into poverty and debt.
“Higher fuel prices will increase the cost of production and transportation of food, which is later transmitted to consumers, particularly staple foods such as maize meal, wheat and its products such as bread and oilseeds. Already most households are battling to put enough nutritious food on the table, and all they have to look forward to is more cost-of-living increases that will drive prices up even more. How much longer before they buckle under the pressure?” he asks.
“We are seeing more people across the income spectrum turning to credit to get through the month and defaulting on their debt,” says Roets.
“My advice to those who are in a debt trap is to remember that you are not alone. Seek help from a registered debt counsellor who can assist you to manage your financial predicament,” he advises.
“This has been a very successful solution for thousands of consumers who are plagued by over-indebtedness.”
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