Expect the biggest fuel price hike in South Africa’s history next month: AA

Mid-month unaudited data from the Central Energy Fund (CEF) is predicting the biggest fuel price hike in South Africa’s history by some margin, says the Automobile Association (AA).

“A spike in international oil prices and a huge swing in the Rand/US dollar exchange rate have combined to predict a knockout blow at the pumps at the end of September,” the AA said.

“Based on the current data, petrol users will be paying R1.12 more per litre, with illuminating paraffin costing R1.17 more,” it said.

Diesel users will be hit hardest, with a possible price hike of R1.38 per litre, pushing diesel to within a whisker of R16 per litre.

To put this in perspective, should this increase materialise, it will push the price of 93 unleaded octane fuel inland close to R17 a litre, off a January price of R14.20 – a total increase of around 20 percent, year-to-date, the association said.

It also pointed out that a massive hike in the diesel price will be especially catastrophic for the agricultural sector which is already reeling from the prolonged drought. It said that extreme fuel price hikes could push marginal businesses, including farms, to financial breaking point, and have a massive negative impact of consumer pricing.

“While we earnestly hope the picture improves before month end, we once again call on the government to urgently address the policy and structural issues which have put fuel users in the front line of the Rand’s weakness,” the AA said.

In trade on Thursday, the rand benefited from a lift in the Turkish lira. Bianca Botes of Peregrine Treasury Solutions, said in a note that Turkey raised interest rates to 24%, causing the Turkish lira to strengthen by 4%. “The rand is reaping benefits from this impressive move by its peer with an initial kneejerk to R14.70/$,” Botes said.

Brent crude however, moved past the $80 a barrel mark, close to 2018 highs, due to continuing economic sanctions imposed by the Trump administration on Iran.

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)

Neil Roets, CEO of debt counselling firm, Debt Rescue, said the massive expected fuel price increase could be the straw that breaks the camel’s back.

“We keep saying that consumers, who collectively owe more than R1.7-trillion in outstanding debt, literally have reached the end of their tether but this is definitely the straw that is going to break the camel’s back.”

Roets said it was highly likely that the local currency would weaken further against the US Dollar and that the price of crude was going to spike.

“The northern hemisphere is entering autumn which is when consumers fill up their heating oil tanks causing demand to spike. This, coupled to pending oil sanctions against Iran, is going to increase demand causing prices to increase.

“What may have been a technical recession is almost certainly now going to balloon into a full-scale recession despite optimistic utterances from president Ramaphosa,” Roets said.

Roets said the fallout from Donal Trump’s trade war with China and the European Union was already having an effect on the local economy.

“We see growing numbers of distressed consumers applying for debt counselling on a daily basis and while we are obviously grateful for the business, this is very bad news for consumers.”

“More than half of all consumers are three months or more in arrears with their repayments and this figure is expected to keep climbing steadily as South Africans are getting deeper and deeper in debt,” Roets said.


Read: Petrol prices expected to hit R17 a litre in October

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