Economists predict petrol price increases and more taxes

FEBRUARY 24, 2015

Local economists have predicted that the price of petrol may rise by as much as R1 per litre next month (4 March), while the wholesale price of diesel may go up by 80 cents - after seven straight months of fuel cuts stretching back to August 2014. they have also said Finance Minister Nhlanhla Nene has little choice but to raise taxes during his 2015 budget speech on Wednesday.

Paul Joubert, senior economic researcher at the Solidarity Research Institute, noted that from an average price of about $44.40 per barrel in January, the price of a barrel of the Organisation of Petroleum Exporting Countries (Opec)’s oil has so far in February traded at about $53.10 – an increase of about 20%.

“With the weakening of the rand since 8 February the average exchange rate is also no longer serving as a cushion against the rising dollar oil price,” the research lead said.

However, the expected prices for March would still be approximately R3 per litre cheaper than in the same period a year ago, the institute said.

Good times

In the first week of February, the price of all grades of petrol dropped by 93 cents a litre.

In early January the price of 93 and 95 octane petrol decreased by R1.27 and R1.23 a litre.

The current price for a litre of 95 Octane petrol in Gauteng is R10.31.

More taxes expected at Nene’s budget speech

Meanwhile, some economists believe Finance Minister Nhlanhla Nene will raise taxes during his 2015 budget speech.

“It’s not going to be a once off thing of higher taxes this year, it’s actually could be rolled out over the next three years. I think that’s going to be the nature of this 2015 budget speech, that’s going to show South Africa’s tax course for the next three years,” Investec chief economist Annabel Bishop says.

Iraj Abedian of Pan African Investment and Research agrees Nene’s budget plans could deal with increasing the taxes and cut some expenditure.

“There is almost no doubt that the minister in the short-term has very little options but to cut some of the expenditure in real terms and at the same time increase the taxes.”

Nene needs to find an extra R12 billion to help fund this year’s budget - with little choice but to raise taxes.

The question is whether Nene will target top earners or an already squeezed middle class.