How to cope with rising petrol prices

4/30/2018

The surging consumer prices are creating financial problems for many families. We have been dealt yet another financial blow. The Energy Department announced that the fuel price is set to rise by 49 cents and diesel will cost between 58 and 59c/l more from 2 May. The wholesale price of illuminating paraffin will rise by 69c/l, while the retail price of LPG will increase by 70c/kg.

The department listed three main reasons for the fuel price adjustment — the contribution of the Rand/US Dollar exchange rate; the increase in the prices of crude oil; and the import prices of Petroleum products.

We know since the attack of USA on Iraq, the war on terrorism has been converted into war for oil, and ever since the petrol price is not constant.  That higher prices are now regarded as the norm meaning as consumers we are often faced with making lifestyle changes.

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So what does this mean for you?

Because petrol prices play such an omnipresent role in contemporary society, their fluctuations have been the subject of enormous academic study, across many facets of life and economic measures — from public health and driving behavior to business economics and public policy.

Research by forecasting firm IHS Global Insight shows that every 10 percent increase in petrol prices lowers consumer confidence by about 1.5 percent. Rising petrol prices also make consumers think that future inflation is likely to be worse than it might otherwise be, another reason they become gloomy and rein in spending. 

Firstly, the cost of getting basic necessities - particularly food - invariably goes up along with an increase in the agriculture and machinery stuff. So get ready for a bigger grocery bill for starters. If you use public transport, things will still be fairly stable as incremental increases are controlled by the government, but be prepared to pay slightly more than you were initially budgeting for.

Interesting Facts from Stats SA on SA spending habits: 

 -We spend more money on beer than vegetables. Beer accounted for 2.1% of household spending while only 1.5% was spent on vegetables.
- Poor households spend most (30%) of their income on food, compared to non-poor households which only spend 10.5%.
- Spending on sugar, sweets and desserts (8,1%), hot beverages (mainly tea and coffee) (7,5%), and spirit coolers & ciders (8,1%).
- Male-headed households spend more on shoes and clothes, R5,343 a year, compared to female-headed homes, which spend only R4,364 on shoes and clothes a year. 
- The greatest household expenditure went to housing and utilities (32.55%), followed by transport (16.29%).
- On average, households spent more on recreation and culture (3.81%) than they did on education (2.45%).

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Rising petrol prices affect the economy in a lot of ways that aren't immediately obvious. It is important to note that consumer spending on petrol contributes to GDP. Various studies have explored the impact of petrol price increases on consumer behaviour. Brown University economist used petrol purchasing data to show how consumers make buying decisions when prices jump at the pump. When petrol prices went up people behaved as if they were much poorer, buying cheaper petrol -- as if an increase in petrol prices had decreased their annual income by hundreds of rands.

The best possible ways in which your and your family could in theory cope with rising prices is by: 
  • Making an effort to find the cheapest prices for the products you buy. 
  • Cut back on spending on entertainment, recreation, or eating out. 
  • Try out cheaper, lower-quality goods or shop more often at discount stores especially for the young kids.
  • Keep track of your family spending and have a monthly budget
  • Hold off from big purchases you previously intended to make.
  • Find a hobby that could make you extra money or second job.
  • Start working out at home – for free.
  • Car sharing is a possibility. 
  • Invest more 
Increasing prices are not a new challenge. But if you don't plan properly they can really throw a wrench in your budget or finances if you are not careful. The important thing is to ensure your spending is flexible enough to weather through these changes.

What is your tips for coping with rising petrol prices? 

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