South Africa’s big petrol price gamble

Government intervention to help lower South Africa’s petrol prices in April and May will be welcomed by motorists, but there is no guarantee that international factors will have improved by June.

This concern was flagged by both National Treasury and Department of Energy officials in presentations made to parliament in March about possible interventions.

While it is generally understood that government should review how the Basic Fuel Price is calculated as a long-term measure to reduce the country’s petrol prices, officials noted that the current record-high petrol price was primarily being driven by international factors. This means there is little government could do in the short term that would have a long-term impact.

“A lot depends on what might happen over the next two months and we are talking here about international oil prices,” Nedbank economist Isaac Matshego told the SABC.

However, there is a concern that international oil prices could further continue to increase if tensions between Russia and Ukraine are prolonged.

“We have seen the rand working in our favour, helping to contain the impact of the high international oil prices. What we hope for over the next few weeks is that oil prices will come down, actually come down enough to really result in the reduction of basic fuel prices because that is what really matters,” he said.

April petrol price 

The price of 93 octane petrol increased by 28c/litre and 95 octane petrol by 36c/litre on Wednesday (6 April), despite an intervention by the National Treasury to reduce the cost of fuel by more than R1/litre by cutting the General Fuel Levy (GFL). The price of diesel fuel increased by between R1.52/l and R1.69/litre.

“The only driver behind these increases is the rising price of international petroleum which contributed 100% to the increases seen locally,” said the Automobile Association’s (AA’s) Layton beard.

“The recent strong run of the rand against the US dollar contributed to shaving some of this increase off the final adjustment for April, without which the increases would have been more significant,” he said.

The AA said it appreciates that there is no quick-fix solution to mitigating rising fuel costs and that the current high prices cannot be sustained by a consumer base.

“The intervention to cut the GFL is significant as it shows the government is taking the issue of rising fuel costs seriously, which is to be welcomed. It also has indicated that it is looking at several proposals to deal with rising fuel costs into the future.

“Whatever plans the government is considering, though, these should be fast-tracked as the trend of increasing fuel prices is likely to continue in the short- to mid-term, especially as the situation in Ukraine remains unresolved, which is adding pressure to the international petroleum product price, and, in turn, to local prices,” said Beard.

Permanent solution needed 

This was echoed by Neil Roets, chief executive of Debt Rescue who said that the country now needs a permanent solution.

“That government’s fuel levy reduction in April may soften the blow of the price hike on people’s pockets, but it is simply not enough to offset the pain consumers will endure when purchasing fuel at the pumps.”

He noted consumers have had to dig deep over the past year to survive the constant price hikes in fuel and to manage the repercussions of this on their livelihoods and lives.

“The stark reality is that consumers have been grappling with consistent petrol price hikes since January 2021 when motorists could fill up the tank with 95 Octane Petrol at just R14.99 per litre. The latest adjustment, which pushes the price of diesel up by R1.52 per litre, will increase the price of 93 Octane Petrol to R21.63 and brings 95 Octane Petrol up to an unprecedented R21.96 per litre.

“This reflects a massive increase of 46,5% over a fifteen-month period – and all indications are that prices will keep on rising in the months to come. This is on the back of the March increase which pushed petrol prices to an all-time high.”

Read: Warning over petrol price deregulation in South Africa

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South Africa’s big petrol price gamble