Petrol price drop joy could be eroded by fuel tax increase: Economist

JANUARY 31, 2015

An economist on Friday warned that joy at the petrol station could be short-lived as the expected huge drop in the fuel price would be cancelled out by an increase in fuel tax. This is after the Energy Department announced that South African motorists can expect a petrol price decrease of 93 cents a litre from Wednesday, while the price of diesel would fall by one rand and two cents a litre.

Chief Economist at the Efficient Group, Dawie Roodt, told the SABC that the good times will not last forever.

“It will push the inflation down even further and is likely to postpone the Reserve's Bank’s possible decision of increasing inflation over time but it is not only good news. I think we have to be careful that the oil price is likely to increase over time eventually. And also the Minister of Finance is likely to increase the taxes on petrol with a substantial amount in the budget,” he said.

This week’s price drop is the second drop since the beginning of 2015. Petrol decreased by R1.27 earlier in January in what is considered to be one of the biggest single monthly drops in history.

Global oil prices are not expected to rise again for at least another year because it will take some time for the oil in the already over-supplied market to be used up.