Market Update: Work from home back on the table in SA amid fuel price crisis – Full Analysis

• Government and fuel industry representatives have suggested remote work as a practical and immediate way for households to cushion the impact of a looming fuel-price shock, with increases expected to take effect from 1 April and potentially extend into May.
• A significant fuel-price adjustment is expected to be announced on Friday.
• Stakeholders are now discussing how the fuel-pricing mechanism can support security of supply.
• For more financial news, go to News24 Business.

South Africans may soon find that one of the most effective ways to cope with sharply rising fuel costs is simply to stay off the roads.

Government and fuel industry representatives have suggested remote work as a practical and immediate way for households to cushion the impact of a looming fuel-price shock, with increases expected to take effect from 1 April and potentially extend into May.

The idea, which was raised during a media briefing on fuel pricing on Wednesday, was put forward by Robert Maake, the fuel-pricing mechanism director at the Department of Mineral and Petroleum Resources.

“[One] recommendation is working from home to reduce the demand and also to save on the cost,” he said

Avhapfani Tshifularo, executive director of the Fuel Industry Association of South Africa, said fuel-demand curtailing measures like working from home had not been seriously discussed by stakeholders yet because fuel supply remains adequate.

“We don’t need to force that, but it’s probably one of the options that employers can consider, just to make sure that they ease the pain on their employees in terms of the cost of fuel,” he said.

Global fuel-price shocks and growing supply fears have been driven by global oil-market volatility linked to the US-Israel war on Iran, which has kept Brent crude prices above $100 a barrel for almost two weeks.

Global comparisons

In response to the disruptions, Bangladesh, Pakistan, Vietnam and Thailand have all introduced new rules to allow public servants to work from home, and governments there have encouraged the private sector to do the same.

In the Philippines, some government departments now force employees to work from home at least one day a week. Thailand is also encouraging work from home and has called on citizens to ditch suits in favour of T-shirts in a bid to cut down on energy used for cooling.

Sri Lanka has shortened working weeks for some government employees to four days, with most state institutions, including schools and universities, now closed every Wednesday to conserve fuel.

Motorists are also only allowed to buy 15 litres of fuel a week. In Egypt, all shopping centres, stores and restaurants must now be closed by 21:00 on Wednesday and 22:00 on weekends.

READ | No flights, no street lights: Emergency steps taken worldwide as war causes fuel havoc

While South Africa’s fuel industry insists supply is secure for now, the price pain is unavoidable as the government prepares to announce significant fuel-price adjustments on Friday.

At least R400 a month increase

Although final figures will be confirmed when the Department of Mineral and Petroleum Resources announces prices, industry data already points to a steep increase of several rand a litre.

The impact on households will be swift. The Fuel Industry Association illustrated that a typical commuter driving 1 000km a month, using about 80 litres of fuel, would pay an extra R400 a month if petrol prices were to rise by R5 a litre.

That is before knock-on effects, with fuel a key input into food, logistics and even electricity generation, where diesel is used for peaking power. The diesel price is not regulated and so has already been rising in response to global price developments.

At the core of the regulated increase is the Basic Fuel Price (BFP), which refers to the import parity price that reflects what it would cost to bring refined fuel into South Africa. It currently accounts for about 43% of the pump price.

As explained by the industry association, the BFP is being pushed higher by rising oil prices, a weaker rand-dollar exchange rate, and higher shipping and insurance costs.

Certain local costs are further factored into the overall fuel price that one pays at the pump. This includes distribution costs, wholesale and retail regulated profit margins, and taxes and levies.

Some of these are also set to rise in April, including the general fuel levy, the Road Accident Fund levy, carbon taxes and pipeline tariffs. These adjustments will add 21c to the petrol price — negligible when compared with the oil-driven increase in the BFP.

Because prices are only adjusted monthly, any mismatch between global costs and local pump prices is tracked through the slate mechanism and is later recovered from consumers.

No real shortages

Despite reports of some service stations and fuel depots running dry, officials insist South Africa is not facing a fuel shortage. Instead, they say, the pressure is being driven by behaviour.

“There is diesel… It’s just the rate at which these stations are being replenished,” Tshifularo said, pointing to panic buying and bulk purchases ahead of the price hike as the main cause of localised outages.

Some buyers, particularly those with storage capacity, have been placing larger-than-normal orders to beat the increase, temporarily draining supply at forecourts.

Given South Africa’s reliance on imported oil and fuel, the government has limited ability to shield consumers.

While options such as adjusting levies or smoothing price changes are theoretically possible, no immediate relief measures have been confirmed.

The DA on Wednesday called for a 50% reduction in fuel levies and said it had submitted an “urgent” proposal to Mineral and Petroleum Resources Minister Gwede Mantashe and President Cyril Ramaphosa.

Following the 21c a litre increase, the general fuel levy and RAF levy will be a combined R6.35 come 1 April. But the DA is advocating for this to be cut to R3.17 to offer immediate relief.

READ | SA can find the money to cut fuel levies by 50% for 6 months – DA

On Wednesday, Central Energy Fund data indicated an increase of R5.72 a litre for 95-octane petrol – taking it to R26.23 a litre once the levy increases are added. The projected increase for wholesale diesel is R9.67 a litre and R11.42 a litre for paraffin.

In mid-2022, when fuel prices peaked at more than R26 a litre, the government sold off strategic oil stocks to fund a temporary R1.50 a litre cut in the fuel levy to help cushion consumers.

Both Maake and Tshifularo said they were not aware of what measures could be implemented, as these discussions are taking place at a different level in government.

In terms of supply, Tshifularo said that the fuel-pricing mechanism for both petrol and diesel and how it supports security of supply is being discussed.

“There is some discussion. I’m sure something is going to be communicated very shortly, particularly if the war continues into the next month or so,” he said.