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Fuel prices are rising sharply for the poor, but it is a silver lining for Rand

The government has decided to extend fuel tax relief for two months. This meant that the projected R4 increase per liter did not materialize. But the measure could not prevent the increase in petrol, diesel and light paraffin. Gasoline rose by R2.43 liters for 93 octane unleaded fuel. Andre Cilliers at TreasureOne said in an interview with BizNews that the increases will have a serious effect on our inflation and growth rate and that the poor will be particularly hard hit by it as they have no other type of public transport. However, there is a silver lining our currency. – Linda van Tilburg

Rising fuel prices will have a serious effect on our inflation and will have a direct impact on disposable income

What happens with the stripe and with the oil price, this is all intertwined and part of it is about the fuel tax which was discounted with us two months ago and will take over again from 1 June. This will have a serious effect on what can be expected from our inflation. Inflation takes money out of people’s pockets. The fact that they have to pay more for fuel is a direct hit in their pockets. We have received a 50 basis point increase in interest rates for people with mortgages. It is a direct blow to their disposable income and it simply means that the consumer is under a lot of pressure in South Africa. And the lower you go on the income line, the more serious it becomes for the people; and when all is said and done, you are going to ruin what will happen to our already low economic growth.

So things do not look good. And if you look at oil prices and oil price forecasts, we’ve reached $ 20 a barrel, which is already more than the average price of the month. So, in other words, you’re going to start the month on the back foot and it’s expected to go further at $ 150 and $ 140 a barrel. It has everything to do with the oil supply from Russia, which is less than it was before. We are not seeing any increase in production from the strategic reserves of the Middle East issued by certain countries, especially the United States. It was not enough to assist in the supply of oil. So things look bad and we know all over the world that we have an inflation problem and that will only contribute to that problem. What one can say is if one looks at rising oil prices without reducing demand; it simply means for every barrel of oil you imported – that you used to pay $ 100 for – you are now buying for $ 120. That’s $ 20 a barrel more to buy in the private market. This puts pressure on the exchange rate because the cost of your import is much higher and the cost of imported food and the cost of transportation will be much higher.

Consumers are under pressure, but it is a silver lining for rand

If economic growth and demand from consumers will be lower because they are under a lot of pressure; in the end, there will be less demand for imports of oil and other goods, because the consumer simply can not afford it. This in itself is very negative for economic growth. But when all is said and done, it’s a bit positive for the exchange rate. And it’s interesting. Many people think that in good times your exchange rate should strengthen, but that’s really when it weakens because imported goods are so much more because people spend more. So the opposite is true; the lower your economic growth, the better the exchange rate because your terms of trade cause more exports and less imports.

Increase in fuel prices would hit the poor hardest

The increase in fuel prices will have a direct impact on people who use taxis because of the public transport system. There are no trains or trams. So it’s really bad for South Africans, especially people in poverty. They have to get to work to earn money to be able to buy food. Now a much larger proportion of their money goes to getting to work and food. This has a very bad effect on South Africa. Yes, we’ve talked about it and it was I who said, you know, South Africa’s fuel levels are not always that high, but there is a very unequal distribution of wealth. The impact of this on poor people in South Africa is much greater than in other first world countries.

In South Africa, if fuel prices rise by 15% and 20% at the same time, it will certainly affect what happens to people’s incomes and it will affect their social and economic status. It can lead to riots, etc. because the stroke is at the bottom of the chain.

The level of stripes is expected to be between $ 15.80 and $ 15.90 due to the strength of the dollar

At the moment we have seen rand come back from the R16.25 points; it was about R16.50 and we had seen it come back. We traded all the way down to R15.45, R15.50 and R15.46 yesterday. But it was not because of the strength of the rands or because of interest rates in South Africa or anything. It was linked to what was happening internationally in terms of the value of the dollar. We had seen the dollar go from $ 1.05, $ 1,045 points against the euro, close to $ 1.08 points. It’s lower again now, but it went close to $ 1.08 points and that was when the strip also went international. All emerging markets performed fairly well during this period because the dollar lost a considerable amount of its value. But this is already spinning and we are below the $ 1.07 points. We can expect the rand to split again closer to $ 15.80, $ 15.90 points again simply because of the strength of the dollar. And the strength of the dollar is closely linked to what is happening with US interest rates, and its inflation is still under great pressure. We have seen in the minutes of the Central Bank meeting; It is quite unanimous from everyone in the Central Bank that the next interest rate hike will also be 50 basis points to try to curb inflation, which is consistently high at these levels.

Pressure is easing in Chinese ports, which bodes well for South Africa and other emerging markets

I think we have to keep a close eye on what is happening in China. China is coming out of some of its closures and they are opening up the market. It puts pressure on oil prices once again because demand for oil from the Chinese side is increasing. But that simply means that their demand for products is increasing because they have imported less and exported less. So business comes back into the market and helps the economy. It makes conditions normal and there could also be a normalization of the transport sector in the sense that ships can enter ports and unload; containers will be loose because the turnaround is shortened because ports are actually working. So, keep an eye on what’s happening in China as it could return economic growth to the global economy and could bode well for South Africa and emerging markets.

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Fuel prices are rising sharply for the poor, but it is a silver lining for Rand

Source link Fuel prices are rising sharply for the poor, but it is a silver lining for Rand

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