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How petrol affects tills, travel | News

Consumers will have welcomed the drastic drop in fuel prices on Wednesday resulting from the drop in oil price from $100 (R1 157) to $53 a barrel, but they won’t necessarily see a dip in the price of consumer goods.

Retailers said the oil price was one of many factors they considered when determining the prices they charged their customers.

“Retail businesses can’t regulate their prices according to when the petrol price goes up or down,” explained Andrew Layman, chief executive of the Durban Chamber of Commerce and Industry.

“They don’t put prices up every time the petrol price goes up. They absorb the extra cost and profits go down. What happens here is that, with the petrol price decrease, profits will go up but there may be a delay in retail price increases. In the transport industry, I can’t see taxi owners putting their prices up but there will be delays in increases.”

He said the process was cyclical and chances are petrol prices would go up again. “We have to expect peaks and valleys, but hopefully they are far apart.”

The price of crude oil has dropped since July year. According to the Pietermaritzburg Agency for Community Social Action’s food price barometer, the price of mealie meal increased by R20.50 between June 2013 and June last year.

A 10kg bag of rice went from R70.24 to R72.49, 2l milk R19.98 to R22.49 and bread from R8.37 to R10.01 in the same period.

Neil Westerhof, Divisional Marketing Manager for Spar KZN, echoed Layman’s views, explaining that food prices would not necessarily go down, but rather level out for a period of time.

“The drop will have an effect in the long run because suppliers’ prices will go down but petrol is just a percentage of the cost factors, along with electricity and labour rates.”

Westerhof said there would be a more noticeable difference in the price of perishables.

“Fruit and dairy will hold their prices for longer.”

Head of corporate affairs at Pick n Pay, David North, said the drop would have a “moderating effect” on the prices of goods and services which use fuel for manufacturing or distribution.

“However, fuel is only one factor, so it isn’t possible to give any firm estimate of the impact,” North said.

A spokesman for the Shoprite Group said it used various methods, including subsidies and inflation fund promotions on basic foods, to prevent price increases, and as a way of passing on savings as a result of petrol price decreases.

Wendy Alberts, chief executive officer of the Restaurants Association of South Africa, said customers of the service industry would not see a decrease in food prices at their favourite restaurants.

However, as with Shoprite, consumers would see financial rewards via promotions.

“This is the more obvious benefit that the fuel price drop will have, provided the suppliers drop their prices.”

Motorists driving private vehicles might feel the financial relief, however, those relying on public transport would not see any immediate effects.

Henry Mbatha, Chairman of the KZN Transport Alliance, said the drop in the petrol price would not affect fares.

“The petrol price may go up or down once a month but we only adjust fares annually.”

Spokesman of the KwaDukuza Taxi Association, Bongizizwe Mhlongo, agreed.

“If you run a business like that we would have to raise the fares when petrol goes up which can be more than 10 times a year. We would have people protesting. We raise tariffs annually, probably in February,” Mhlongo said.

- Published in Independent Newspapers on 9 January 2015.

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