Today's Big Stories

3 reasons for the petrol price hike (and why it will hurt more than you think)

The petrol price will increase by 52 cents a litre, while the price of diesel will increase by 76 cents from 1 June.

Chief Economist at the Efficient Group Dawie Roodt explains that the price hike will inevitably lead to inflation and the rise of interest rates.

It's really going to hurt us all. It's going to lead to the increase of other prices and boost the spiral of inflation. Eventually, it will force the Reserve Bank to start increasing interest rates.

Dawie Roodt, Chief Economist at the Efficient Group

He offers three factors which contribute to the petrol price hike:

1. The exchange rate

The exchange rate of the currency has fluctuated due to political uncertainty and the possible downgrade of South Africa from credit ratings agencies.

3. Taxes

An increase in the amount of tax paid towards petrol, in particular the fuel levy.

2. The oil price

The rise of the oil price has contributed most significantly to the rise of the petrol price. It will also result in the rise of transport and food costs.

According to Roodt, the petrol price could see a further hike again, if the oil price continues to rise and the rand remains unstable.

Listen to the full conversation from CapeTalk's Breakfast with Kieno Kammies:

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