The Big Petrol Price Cut Swallowed by Electricity Cost Increase

For the first time in 6 months, petrol and diesel prices will be dropping on Wednesday, however, this is going to be swallowed by the electricity increase that starts on Monday 1stJuly.

Petrol 95 will be dropping by 95 cents per litre and 93 octane drops by 96 cents per litre on Wednesday. Diesel is set to decrease by 74 cents.

Cliff Johnston, SA National Consumer Union deputy chairperson said that if the price reductions are sustained then the effect will be beneficial for all consumers. 

Those that are buying petrol, diesel, gas and paraffin will benefit from the price drop immediately as refuelling a standard car should work out to be about R30 – R40 cheaper once the decrease kicks in. 

However, he also said that other consumers may not be as lucky, as taxi and bus fares are unlikely to go down. He went on to say that service providers generally cash in on reductions rather than passing the savings on to consumers. A lower fuel price, in the long run, should mean that the public transport prices and prices of general goods and services should not increase as much as long as the current fuel prices are sustained. 

Economists have said that the decrease in fuel prices is to neutralise the increase in electricity tariffs. 

Without a doubt the fuel decrease will come as a relief to consumers following the tightening of belts over the past few years due to low economic growth, higher taxes and the fear of retrenchment in a weak economy said Azar Jammine, director and chief economists at Econometrix. 

This amounts to a decrease of about 6% in the price of petrol and diesel according to Jammine, which then accounts for about 4.5% of disposable income for the majority of people. In essence, this will reduce the cost of living by R2.50 for every R1000 that people have. He also pointed out that the electricity tariffs are set for the whole year, whereas petrol and diesel prices are volatile. 

Mike Schussler, economist said that the decrease in fuel is good news and may strengthen the case for interest rate cuts as it will help to stabilise the inflation rate that was at 4.5% last month. 

However, the electricity price increase comes in to effect from 1stJuly for most municipalities, which then negates the petrol price drop. 

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