Motorists may save up to R600/month as oil prices expected to remain low: Economist

FEBRUARY 11, 2015

According to a leading economist, oil prices will likely remain low for the most part of 2015. Chief economist at Standard Bank Goolam Balim says that growth rates in most economies will grow handsomely as a result of the impact of lower oil prices. 

“So we anticipate roughly a point six of a percentage point buoyancy to be added to world growth. Point 7 for the developed markets and point 6 percentage point of buoyancy for the emerging markets as a collective basket.

“The U.S economy benefits materially And this is the case because it is a fairly energy intensive economy. Asia is the biggest beneficiary in terms of zone. China, North Korea Thailand. South Africa is also a net beneficiary, especially in light of oil and petroleum products being above 20% of total imports,” Blaim says.

He adds that some countries in Sub-Saharan Africa will benefit from the lower oil prices but the major oil producing countries will be hit by the decline.

“Oil exporters that will be materially impacted by the decline in oil prices in a negative way is Nigeria and Angola.

“In Nigeria at least 90% of oil forms the foundation of the export basket. We have already seen the current account come under pressure, slipping to what was a buoyant surplus into deficit. The currency has depreciated. In addition to that there are some countries that will be net beneficiaries and those include Sierra Leone, Cameroon, Kenya, Uganda and South Africa,” he describes.

South African drivers save about R600/month

Balim adds that South Africa can save up to R42 billion on transportation relief if the oil price stays at current level. The average motorist in the country will save about R600 a month if oil prices remain below 60 dollars a barrel this year. 

“But let's translate this a little bit more practically, in urban Gauteng if an individual drives 15 hundred kilometers a month. That person will use 150 liters a month the saving to that individual will be about R600. In a two car households that will be R1 200. But that is not to be scoffed at,” he says.

The poor not benefiting

However, Balim warns that poorer households are not benefiting from the lower oil prices.

“Poor households are less likely to benefit from, more that two thirds of poor households use public transport. They don’t have access to their own vehicles. Indirectly will be static transport charges for a while. Poorer households will likely benefit from a more generalized subdued inflation environment. Poor households do have access to illuminating paraffin and those prices have fallen by 35% since August.”