Market Update: We break down the business implications, market impact, and expert insights related to Market Update: It’s going to be rough: The final fuel increases you must expect – Full Analysis.
April’s expected record fuel price increases will take a heavy toll from SA consumers, and the broader economy.
Dwayne Senior/Bloomberg via Getty Images
Unless government steps in to soften the blow, fuel prices will increase by between R5.53 and R11.63 per litre on Wednesday, 1 April.
At the end of the four weeks used to calculate April’s changes, the underrecoveries per litre are as follows (the numbers are rounded):
- 95-octane petrol: R5.82
- 93-octane petrol: R5.32
- diesel with 0.05% sulphur: R10.13
- diesel with 0.005% sulphur: R10.27
- paraffin: R11.63
The underrecoveries indicate how much motorists have underpaid for fuel the past month based on the international prices of the different fuels in dollar, combined with the rand-dollar exchange rate. In other words, these are the market-related changes to the fuel prices motorists will have to bear.
Between 53c and 83c per litre, depending on fuel type, is owing to the depreciation of the rand to weaker than R17 per dollar, while the biggest chunk is because of fuel price increases. Both factors can be squarely attributed to the US-Israel attacks on Iran on 28 February which have escalated to a Middle East conflict throttling fuel supplies.
In April, annual increases in the different fuel levies and taxes also apply to petrol and diesel. Minister of Finance Enoch Godangwana in February’s Budget announced a collective increase of 21c per litre for the general fuel levy (9c on petrol and 8c on diesel), the Road Accident Fund levy (5c on petrol and 6c on diesel) and the carbon tax (7c for both petrol and diesel).
Adding the levies to the underrecoveries means fuel should increase as follows:
- 95-octane petrol: R6.03
- 93-octane petrol: R5.53
- diesel with 0.05% sulphur: R10.34
- diesel with 0.005% sulphur: R10.48
There are no levies on paraffin, but the price will almost double, affecting all who use it for heating or cooking, and coinciding with colder weather setting in.
The underrecovery on gas is not indicated in the Central Energy Fund data, and remains an unknown until the final announcement of fuel price changes by the Department of Mineral and Petroleum Resources.
The announcement is expected by Tuesday at the latest, unless government changes its script with a special announcement in the light of the fuel crisis.
Considering the massive increase, a slate levy is not impossible, although the balancing of the Slate Fund is done two months after the fact. The slate levy is officially 0c per litre at the moment. The fund had a strong positive balance of R5.9 billion at the end of January; when the fund drops to -R500 million, a levy has to be instituted.
If the increases are in line with expectations, fuel will cost:
- 95-octane petrol: R26.33 per litre in Gauteng and R25.50 at the coast
- diesel with 0.05% sulphur: R28.88 per litre in Gauteng and R28.05 at the coast
- paraffin: R24.17 per litre in Gauteng and R23.16 at the coast
Motorists are urged not to wait until Tuesday to fill up, since there are temporary fuel shortages at many fuel stations.
READ | Running dry: Some SA fuel stations are limiting sales
Some fuel stations are limiting the amount of fuel people are allowed to buy, some limiting it to a tank, others to 80 litres or 100 litres.
Someone filling up an almost empty 50 litre tank before Wednesday, will save R301.50 on petrol and R517 or R524 on diesel (0.005% sulphur being the higher amount).
Motorists who use about 200 litres of petrol per month, will have to budget R1 206 more for petrol in April; and those with diesel vehicles will spend about R2 068 or R2 096 more, unless they put the brakes on driving.
To add insult to injury, the increases come during the school holidays and on the eve of the Easter weekend, when many South Africans would normally want to visit family, attend church functions or take a mini-break.
The price of diesel has already started rising as wholesalers pass on cost increases to fuel stations. The price of diesel is not regulated at retail level and increases vary widely.
READ | Service stations are already hiking diesel prices to more than R28 a litre
There have been calls from the business sector, labour and opposition parties, both inside and outside of the government of national unity to cut the fuel levies temporarily in order to soften the blow.
READ | SA can find the money to cut fuel levies by 50% for 6 months – DA