With another fuel price of around 85 cents per litre projected for June – due to escalating oil prices – transporters will have been hit with a total R2.06 per litre fuel price hike in just three months, sending logistics operators into a distinct “problem mode”, according to transport economist, Mike Schüssler.
He told FTW that while there might be some fuel price relief towards the end of the year, he expected the fuel price to escalate to its highestever level in July/August of R15.90-R16.20 per litre.
Fuel costs are about a third of transporters’ costs, although most transport operators either have a long-term contract which excludes the fuel price or they have a contract which allows for periods of fluctuation in fuel prices.
“Fuel costs are a marginal cost to their clients (shippers) who are usually prepared to take on the fuel price fluctuations,” he explained, noting that the fuel price increase would therefore not have a massive direct impact. However, there are other factors related to the fuel price which impact transport and trade.
According to Schüssler, the fuel price increase alone will add a 0.5 percentage point to the inflation rate – pushing it up to 5% by mid year. “This means that there will be no interest rate cuts for at least a year to 18 months, according to my contacts at the Reserve Bank,” he said.
This constrains logistics operators’ ability to purchase new vehicles or expand their businesses in other ways as the cost of loans remains high.
Furthermore, while the first quarter of 2018 may see some growth (off a low base however as 2017 was a “dismal” year economically), Schüssler expects it to be far lower than initially projected by global financial analysts.
“The manufacturing sector has seen low output, mining production has been shocking, and the retail sector has seen subdued growth since March – all of which affects the country’s overall growth quite significantly,” he pointed out.
Quote:There will be no interest rate cuts for at least a year to 18 months. – Mike Schussler
