Petrol prices in South Africa have risen 54% in the past two years, with fuel taking up an increasing portion of South Africans’ spending.

This was revealed by Standard Bank’s chief economist, Goolam Ballim, at the company’s Economy 2024 media briefing.

Ballim said household spending in South Africa has shifted significantly since the pandemic-induced lockdowns.

Spending on hardware and interior finishings declined as the DIY boom collapsed from 2021 onwards, following a sharp spike during the pandemic.

Clothing and grocery spending also normalised following rapid increases from the online shopping craze in 2020 and 2021.

However, spending on fuel and restaurants has increased steadily since the temporary dip when the first lockdown was introduced in 2020.

While restaurant spending formed part of what Ballim termed ‘revenge spending’, South Africans forking out more money for fuel has little to do with increased consumption and more because of sharp increases in the price of fuel.

In the past two years, Ballim said the petrol price has increased 54%. This figure excludes the latest price hike of over 70c a litre for both petrol and diesel.

This has resulted in spending on petrol rising to over 8% as a share of total spending by South Africans.

Rising petrol prices are a significant contributor to the escalating cost of living experienced by many South Africans.

Source: Standard Bank, Goolam Ballim

However, relief may be on the way as global economic activity is expected to slow in 2024, thus reducing demand for oil and decreasing the cost of petrol and diesel.

This is the view of Old Mutual chief economist Johann Els, whose comments come after the latest round of fuel price hikes.

Despite upward pressures on fuel prices, global growth is forecasted to slow this year, Els said.

This means declining demand for fuel and, in time, declining prices. In combination with a more stable rand, inflation is expected to slow. Interest rates will likely drop accordingly.

“If we look through that noise toward the medium to longer term, things will start to improve gradually,” Els said.

Ballim also said that the expected disruptions from conflict in the Middle East will have less of an effect than anticipated.

This does not mean there is no uncertainty or risk of a sharp rise in oil prices due to the conflict escalating.

“We don’t know how the Middle East situation will unfold over the next few months. If there’s a blow-out and increased war activity, then certainly there would be upward pressure on oil prices, and then all bets are off,” stated Els.

SOURCE:How much South Africans spend on petrol – Daily Investor