Fri. Oct 18th, 2019

Why record-high petrol prices could hit South Africa this winter

Petrol prices fuel taxesWe’re starting to think a horse and cart would be less hassle: Petrol prices are set for an increase in May, and a winter of discontent waits for SA’s motorists.

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By the halfway point of the month, we usually know if we’re going to get screwed at the gas pumps in a few weeks’ time: The Central Energy Fund (CEF) has confirmed another substantial rise is on the cards for our petrol prices, which are set to increase by 55 cents per litre in May.

It’s not exactly the news that will put a spring in our step ahead of Easter and our motorists are once again ready to be crucified. We’d love to sit here and tell you that things will get better, but that’s really not the case. In fact, South Africa is now dangerously close to breaking an unwanted record.

Highest petrol prices in South African history

The most expensive price for a litre of petrol ever recorded in Mzansi is R17.09. That came in 2018, as fuel costs persistently soared to new heights and set inland consumers back by a cash-busting amount. The current forecast for May suggests that motorists in places like Gauteng will be paying about R16.68 per litre.

That amount is just 42 cents away from smashing the high ceiling. And there are plenty of factors that could conspire to heap the ultimate misery onto South Africans.

Why fuel costs could soon break all the wrong records

First of all, the crude oil price forecast for May, June, July and August predicts that the per-barrel cost will jump from $70 to $86 by the end of winter – an increase of more than 20%. South Africa is heavily reliant on oil imports, where the monthly cost of fuel is largely dependent on how crude is doing. If that goes up, so do our petrol prices.

Month Expected price per barrel of oil Range forecast
April $69.22 $68.22 – $76.42
May $75.29 $75.29 – $80.42
June $79.23 $79.23 – $85.40
July $84.14 $84.14 – $88.26
August $86.96 $86.96 – $93.74

Secondly, there’s going to be another drop in our “fuel tax ocean” at the start of June. The carbon tax will be officially introduced, adding a mandatory nine-cent-per-litre increase onto whatever the petrol price will be six weeks from now. The initiative has been brought in to help the government fight CO2 emissions and climate change.

Relying on the rand won’t do

Of course, there could be some respite for South Africa. The rand has been performing well against the dollar recently, and Moody’s have shifted any potential credit downgrade back to 1 November.

But the rand’s performance is too volatile to spring South Africa out of this particular trap. Even now – during its strongest spell of the past few months – it hasn’t performed well enough to prevent the looming threat of another spike in our petrol prices. Plus, there’s always a shenanigan or two lurking in the closets of Eskom that can tank the ZAR.

The AA addressed this issue on Monday, revealing that th latest data is “a cause for concern”:

“The rand has appreciated quite strongly against the US dollar since the end of March, with the daily exchange rate used for fuel price calculations rising from over R14.60 to the dollar on 31 March to under R14 currently.”

“The ground gained by the local currency has cushioned some of the blow, with diesel currently showing a slight decrease. But petrol users are in for a shock… The rise in petrol is a cause for concern when our economy is already in difficult waters.”

AA statement

Petrol prices: Don’t expect the government to step in

The government could always choose to offset the price of fuel and subsidise it with a contribution of their own. They aren’t likely to give it another try after last year’s failure, however.

Energy Minister Jeff Radebe inadvertently made things worse when the government decided to “soften the blow” and knocked 20 cents off of the impending September increases, but that only caused trouble for the month ahead:

Had there been no government intervention, there’d have been less of a knock-on effect. October’s R1 rise could have been as “little” as 50 cents per litre, had South Africans been allowed to pay the full whack in September.

With all that in mind, it’s looking increasingly likely that a 42-cent rise is more than possible on these shores, to take petrol prices to the highest they’ve even been. Sadly, all the wrong records are being broken in South Africa.

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