While the adjusted fuel prices for May show a decrease in the cost of both grades of petrol, the Automobile Association (AA) has warned that much of this is being offset by government support.
The government has announced that the May fuel prices will see a 12c/litre decrease for both grades of petrol but increases of between 92c/l and 98c/l for diesel inland from Wednesday (4 May).
“Naturally, the decreases in petrol are welcome; they will offer some relief in the short-term. Of concern, however, are the high increases in diesel and illuminating paraffin which will, undoubtedly, put extra financial pressure on millions of South Africans already struggling to make ends meet.
“The price of illuminating paraffin is particularly worrying as this fuel is used for cooking, heating, and lighting and comes as South Africa enters the winter season,” the AA said.
The association said the relief offered in February of a reduction of the General Fuel Levy (GFL) by R1.50 is cushioning the blow of the increases but that a more permanent solution must be found before month-end.
“The government provided short-term relief through reducing the GFL, but this relief ends at the end of May going into June. If the GFL returns to its set rate, that will add another R1.50/l to petrol and diesel and will certainly push the prices of these fuels much higher.
“The question now is how the government plans to deal with the fuel price going forward, and how, ultimately, this will result in sustainable relief for South African consumers,” the AA said.
According to an analysis by professional services firm, PwC, the reduction of the general fuel levy would reduce fuel costs by at least R10 billion over the coming year – and this money has been put back in drivers’ pockets. However, this is only a temporary fix.
Fuel prices have escalated since the start of the year, driving up consumer price inflation, and adding mounting pressure to households that are already struggling to make ends meet.
In March 2022, finance minister Enoch Godongwana said that using the country’s reserves would allow it to reduce the general fuel levy (GFL) included in the basic fuel price by R1.50/litre for the period between 6 April to 31 May 2022.
A broad number of interventions will also be considered once the two-month period lapses, including a review of the basic fuel price, the minister said.
- A reduction in the Basic Fuel Price of 3c/l, in line with the recommendations of the review done by the Department of Mineral Resources and Energy (DMRE).
- The termination of the Demand Side Management Levy (DSML) of 10c/l on 95 unleaded petrol sold inland.
- The introduction of a price cap on 93 octane petrol, following from the previous DMRE proposal and consultation. This will allow retailers to sell at a price below the regulated price.
- The termination of the practice to publish guidance by the DMRE on diesel prices to promote greater competition.
- The Regulatory Accounting System (including the retail margin, wholesale margin and secondary storage and distribution margins) will be reviewed to assess whether adjustments can be made to lower the margins over the medium term. Interventions will be considered by the DMRE to reduce the price pressure for illuminating paraffin over the medium term.