Expert warns fuel hikes could deepen cost-of-living pressure

South Africa’s latest fuel-price increases could push up the cost of living, squeeze household budgets and drive up operating costs for businesses, with the effects likely to extend well beyond the petrol station.

Petrol 95 rose by R3.33 a litre and diesel by up to R3.24 a litre on Wednesday, adding further pressure on consumers and businesses already navigating rising expenses.

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Dr Christopher Ikechukwu Ifeacho, a lecturer in the Department of Public Management and Economics at the Durban University of Technology (DUT), said the increases could affect transport, food production, business operations and the broader economy.

Dr Christopher Ikechukwu Ifeacho, Lecturer in the Department of Public Management and Economics at DUT. Photo: Supplied

“Fuel is a fundamental input into almost every part of the economy. South Africa is particularly sensitive to fuel-price movements because goods, agricultural products, workers and services depend heavily on road transportation,” says Ifeacho.

The Department of Mineral and Petroleum Resources attributed the increases largely to rising international oil prices, with Brent crude climbing from US$87.89 to US$101 a barrel amid geopolitical tensions, uncertainty over oil supplies and higher shipping costs.

Food and transport costs under pressure

Higher fuel prices can increase the cost of moving goods from farms, factories and warehouses to retailers and consumers. Agriculture is particularly exposed because diesel is used for farming operations, irrigation, harvesting and food distribution.

However, Ifeacho cautioned that fuel-price increases do not automatically translate into equivalent increases in food prices, as several factors influence food costs.

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For households, the impact can be felt through higher commuting costs, school transport expenses and the rising prices of essential goods and services.

Low-income households are particularly vulnerable because a greater proportion of their income goes towards necessities. Students who travel long distances to campus may also face increased transport and living costs.

“Higher fuel costs can reduce real household purchasing power indirectly through the higher prices of other goods and services,” he explains.

Businesses face higher operating costs

Businesses in fuel-intensive sectors, including logistics, agriculture, mining, construction, manufacturing and retail distribution, could also face higher operating costs and reduced profit margins.

Companies may choose to absorb some of the additional expenses, improve operational efficiency or pass part of the increases on to consumers.

“This is why a fuel-price increase can have an economy-wide effect even on businesses that are not themselves large fuel consumers,” says Dr Ifeacho.

Higher transport and production costs can also contribute to inflation as the increases filter through to goods and services. If the pressure persists, it could influence wage demands and inflation expectations, making it more difficult to maintain price stability.

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How households can manage the increases

Ifeacho advised households to manage their budgets carefully, combine journeys, plan routes, carpool and use public transport where possible.

He also encouraged consumers to account for the indirect effects of fuel-price increases on food prices, transport fares and other household expenses.

“Most importantly, households should recognise that a temporary fuel-price shock and a sustained increase are different situations,” he says.

He added that reducing South Africa’s vulnerability to fuel-price shocks would require a broader response, including improved public transport, greater transport efficiency, stronger logistics systems, energy diversification and policies that support productivity and competition.

Continued fuel-price increases could constrain economic growth if households cut back on spending while businesses face sustained pressure on operating costs.

Ifeacho said the broader concern was not only what motorists paid at the petrol station, but how long elevated fuel costs persisted and how extensively they affected prices and economic activity across the country.