The World is F***ed #5: A Comparison of Food & Petrol Price Increases in South Africa

Yesterday I read an article on the BBC website that got my mind spinning. The article is about how the UK Office of Fair Trade (OFT) has decided to launch a study into the high price of fuel. In the UK the price for petrol and diesel went up 38% & 43% respectively from June 2007 to June 2012. There are other factors they are investigating, but the bit that got me thinking was their citizens being upset about the 38-43% increase (Read the article here: http://www.bbc.co.uk/news/business-19489908)

This past month our petrol prices went up to their highest ever levels. A litre of 95 octane petrol now costs R11.97 inland and R11.62 along the coast.

Since June 2007, our petrol prices locally have gone up by a massive 59% for 95 octane unleaded and 65% for diesel! The chart below shows us in a bit more detail how the prices have risen and fallen over the past 5 years. In 2008 you may recall that oil prices rose dramatically, reaching a record $147 during July and then dropping to around $40 in December. However despite the oil price being lower than at it’s peak, we are paying R2 more a litre.

Fuel Price

Fuel vs Oil prices (June 2007 – Sept 2012)

Looking at food prices isn’t much better. I chose six random food products that I felt were quite common among all income groups, being: 1l Full cream milk sachet, loaf brown bread, 1kg whole fresh chicken, 1kg beef chuck, sunflower oil & 1kg carrots.

The increases ranged from 30% (chicken) to a massive 104% (Sunflower oil).

Food Price

Food Prices from June 2007 to Jun 2012

Separately, however, these didn’t make much sense, so I went to a bit of effort and created a weighted average between fuel, food and oil prices and compared them to the trend over the years and this is when it made more sense

If you look at the below chart, you will see red, green and blue solid lines indicating the movement of fuel, food and oil over the 5 year period, while the dotted lines indicate the trend created by this movement.

The purple line (X) is based on year on year inflation over this period, in other words what price increases should look like.

5 year trends

Trend of price increases over 5 years

But what do you notice if you compare the 3 trends and the solid purple line? This clearly indicates that fuel, and by comparison food, since SA relies on transport via our road networks, follow the trend of oil prices rather than the actual inflation rates given by government, which granted takes into account much more than I have: house prices, car prices, etc.

I’m no expert in matters like this so if anyone out there can give me a better explanation I will gladly accept it, but as if climate change wasn’t reason enough for us as a species to move away from oil and fossil fuels as a source of fuel and energy, then surely this should be  even more reason?

EDIT:

The sources for all the above prices and rates are:

Petrol Prices: http://www.aa.co.za/

Food Prices: http://www.namc.co.za/

Oil Prices: http://www.investis.com/

Inflation Rate: http://www.liberta.co.za

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