Data from the Central Energy Fund shows that South African motorists should prepare for a massive increase at the pumps in October, as international petroleum prices and a weaker rand continue to hit hard.
According to the report, there is currently a R1.12 under-recovery for 93 and 95 grades of petrol – and things are even worse for diesel, with an under-recovery of R1.38.
If the current levels continue to the end of the month, this will push the petrol price past R17 a litre for 95 octane fuel, and one cent under R17 for 93 octane.
This comes after the department of energy announced a once-off intervention in September to keep fuel prices stable, except for a five cents per litre increase to cover increases to worker wages.
Without the intervention, fuel prices were expected to increase by 23 to 25 cents per litre.
|Fuel||September official||October expected|
|95 Petrol||R16.08||R17.20 (+112)|
|93 Petrol||R15.87||R16.99 (+112)|
|0.05% Diesel (wholesale)||R14.41||R15.79 (+138)|
The steep price hike in October will certainly be a shock to the pocket, but economist Dawie Roodt warned that it was on its way after the surprise intervention in September.
Roodt described the intervention as ‘artificial’, saying that it was only delaying the inevitable.
He said that there is a set formula that the energy department and economists use to calculate the fuel price on a monthly basis, taking into account the ruling international price of crude oil and the value of the rand currency against the dollar.
“By circumventing this methodology and limiting the price increase to 4.9 cents a litre and keeping the diesel price unchanged, there is the very real risk that the increases for months to come will be higher than would otherwise have been the case,” he said.
Economists have warned that South Africans should expect fuel prices as high as R17.90 by the end of the year, and could go as high as R20 per litre by the end of 2019, on a weaker rand, and rising oil prices.
Energy minister Jeff Radebe on Wednesday stressed that September’s intervention was a once-off, adding that the outlook for October is “a major concern” EWN reported.
“I need also to caution members, that as a result of the weakened exchange rate in the last few weeks, the outlook for fuel prices in October is of major concern.”
Radebe attributed rising oil prices and a soft rand for the record petrol price, saying “there is no quick fix”.
DA shadow minister of energy, Gavin Davis MP, however, told Parliament on Wednesday that the high fuel price is a crisis of the ANC’s making.
“Not only has the ANC government let the rand weaken by over 29% since president Ramaphosa’s election, it has slapped a R5.30 fuel levy on every litre of petrol. R1.93 goes to fund the corrupt, inefficient and useless Road Accident Fund, and R3.37 goes into the black hole that is our fiscus.”
Davis questioned how South Africa was paying R5.30 on the fuel levy when, in Botswana, they pay just 40 cents? “This is why the price of petrol in Botswana is just R11.51 per litre – a full R5.00 cheaper per litre than it is here,” he said.
The DA, he said, has a proposal to slash the fuel levy by 20% which would cut the cost of petrol by R1,06 for every litre. To fund this reduction, government would need to find around R 15.5 billion,” he said.
“Instead of spending billions on a bloated Cabinet full of incompetent Ministers and their VIP security, luxury cars and houses, we could use that money to cut the fuel price. Instead of using R59 billion to bail out Zombie parastatals we could sell them off and use the money to reduce fuel costs.
“Instead of allowing Eskom push up electricity prices to pay off its escalating debt, we could unbundle Eskom and use some of the money to reduce the price of petrol,” Davis said.