3 big changes planned for South Africa’s petrol price
Director of fuel pricing mechanism at the Department of Energy, Robert Maake, says the government is working on several regulatory changes to address South Africa’s high petrol price.
Speaking to radio station 702, Maake said this includes:
- The possible introduction of a price cap;
- A proposal to stop publishing guidance on diesel prices;
- A process to review the Regulatory Accounting System (RAS).
These interventions are the three that remain from the initial list of planned changes announced in March 2022, which included a reduction in the basic fuel price of 3c per litre and the removal of the 10c per litre Demand Side Management Levy (DSML) on 95 unleaded petrol sold inland – both of which were part of interventions introduced in May 2022.
Treasury previously said that a review of the RAS could result in a significant decrease of R1.03 cents/litre by 2028. However, this will take significantly longer to implement than other measures and investigations need to take place to fully understand the changes that can be implemented.
Similarly, while Treasury has previously proposed a fuel price cap, it warned that it will require ‘significant investigations’ before officially being introduced. The introduction of a petrol price cap was suggested for 93 unleaded petrol, which would retailers to sell fuel below the regulated prices.
Removing the guidance on diesel prices, meanwhile, would promote competition among retailers.
Maake said that any other proposals – including the opposition Democratic Alliance’s bill to deregulate the petrol price – would have to be tabled in parliament before they could move forward.
Price hike
Maake’s comments come as South Africa faces its largest petrol price increase on record on Wednesday (7 July).
The adjustments announced by the Department of Mineral Resources and Energy (DMRE) include an increase of R2.57 to 95 petrol in Gauteng, which will push the cost of this fuel to R26.74. The increase of R2.37 to 93 petrol will push this fuel price to R26.31, all-new record high prices.
A major factor in the increase of international petroleum prices remains the ongoing conflict in Ukraine which is contributing to supply and demand pressures. As long as this conflict is unresolved, the increases in fuel prices – both in South Africa and other countries – remain likely.
The Automobile Association (AA) warned that the fuel price adjustments announced by the government will hit already financially stretched consumers hard and put extra pressure on an already struggling economy.
The AA said that while pressure is building on the government to formulate a solution to the rising fuel costs, short-term relief, while welcome, is not sustainable.
“We understand that government has little leeway in terms of international petroleum prices and the Rand/US dollar exchange rate, which is why we have called and will continue to press for a review of the fuel price, an area where the government has control over the fuel price.
“There is a need to interrogate all the components of the fuel price, to determine whether all these components are still necessary in the existing formula, and to establish if the current calculations of these components are correct. The longer this review is not initiated, the longer the country will wait for lasting solutions,.”
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