'Prices could rise again'
- economist
THIS WEEK'S fuel price increase will directly add 0.3%-0.4% to the inflation rate, according
to Pieter Calitz, senior economist of Gensec Asset Management.
The indirect effect, however, is very difficult to ascertain, he said, but the longer term effect could go up to 0.8%.
This, Calitz added, will more-or-less wipe-out the 0.6% decrease in the CPI (consumer price index) which would have resulted from April's 1% cut in the interest rate.
However, for watchers of the CPI (the measure of inflation), Calitz expects probably another three drops in the interest rate in forthcoming months, an inflation rate of about 3.5% at year-end, and an annual average for the CPI of about 6.1%.
He also expects the international oil price rise - a major catalyst for the SA under-recovery on fuel in the March/April assessment period - to stabilise at around US$17-per-barrel. This is only marginally more than the current price, but US$1 below the US$18-p-b that Opec (Organisation of Petroleum Exporting Countries) hoped to achieve by planned cuts in its output totals over the last couple of months.
The fact that diesel has been less hard hit than petrol (8c as opposed to 18c) is the only good thing that can be said about any increase in the diesel price, according to Mike Alistoun of the RFA (Road Freight Association). Diesel powers the bulk of the SA road freight industry, he said, not forgetting the Spoornet use of diesel-powered locomotives. Any increase in the transport cost obviously has an immediate impact on the consumer prices.
In road transport terms, the fuel price is measured at 23.3% of the total cost of an Interlink unit (the largest legal size of articulated vehicle on SA roads), according to RFA reckoning.
Of the running cost, Alistoun added, it comprises 51.8% - the rest being finance, depreciation, staff, insurance, maintenance/repairs and tyres, for example.
But a fuel price increase was inevitable, according to Hein Baak of the Department of Mineral and Energy Affairs.
The main driving factors were: The average international prices of petrol, diesel
and illuminating paraffin increased sharply in the March 26-April 25 assessment period; freight rates increased; the rand/US$ exchange rate firmed slightly (6.1498 compared to 6.2075 in the previous period); and the April 7 increase in the fuel tax (petrols only).
In terms of the agreed mechanism, said Baak, price changes are adjusted so that under- or over-recovery during the previous month will be corrected in the following months.
Unit under- or over-recoveries are rounded up-or-down to the nearest full cent.
With effect from March 3, an additional mechanism has been approved by the Minister - intended to assist in management of cumulative slate balances.
This works on the basis that - should the cumulative, individual slate balances (positive or negative) exceed R10-million for petrols; R5-m for diesel; or R1-m for paraffin - an additional 1.0 cent per litre will be added/subtracted to-or-from the price.
The under-recoveries in the assessment period were measured at: -17.136c for petrols; -6.7c for diesel; and -10.617 for paraffin. The cumulative slate balances for each at the end of March were: -R2.852-m; -R17.729-m; and -R0.121-m.
This saw the price adjustments (rounded-off) at: +18c; +7c (plus 1c for the slate balance exceeding its R5-m limit); and +10c respectively.
However, Baak feels that under-recovery may still exist in the current assessment period (April 26 to May 25), and prices could rise yet again.
Also, the controversial use of Singapore and Bahrain spot and posted prices for refined petroleum products in reaching the imported parity price (IPP) of SA fuels, still remains in place.
Two of the world's most expensive filling stations, was how one commentator described them to FTW.
However, said Baak: Discussions are taking place about taking a look at the IPP.
