Most weekend papers ran with stories about how the tough times were now upon consumers in South Africa and that we should brace for the possibility of paying R16 for a litre of petrol in the near future. With the ever rising world oil prices the future is not looking great.
On Friday, the price of oil hit a record of almost $139 a barrel. Some analysts predict that the price could reach $150 as soon as July this year. The oil price continues to rise due to concerns of supply not meeting the demand and the continual political tension in the Middle East. With that said, there has been speculation that the price of oil could even reach the $200 mark by the end of this year. If the price reaches $200 a barrel then we could easily be paying R16 a litre by then. The assumption is: if world oil prices reach $200 a barrel and the exchange rate is R8.50 to the dollar, then we would be paying R16 a litre. On the other hand, if the world oil prices drop to about $60 a barrel then we could be paying as little at R6 a litre. But what are the chances of world oil prices dropping to as low as $60?
With the current high levels of inflation in South Africa, rising fuel prices will not help lowering inflation. If the price of fuel goes up then the prices of food and other commodities will surely go up as well. Consumers spending habits are going to have to change due to increasing fuel prices. Something has to be done to stop these rising fuel prices, if not, the South Africa economy will not grow as much as expected. After the 50 cent increase last week, it is rumoured that there could be another 70 cent increase next month in the price of fuel.
