Big jump in petrol prices coming next week

The latest data from the Central Energy Fund (CEF) shows that motorists in South Africa’s fortunes have turned, and drivers should prepare for a sizeable increase in petrol and diesel prices next week.

The CEF’s data on 25 January 2023 points to a petrol price jump of almost 60 cents per litre, while diesel is expected to climb by around 30 cents per litre.

Prices have continued their gradual trend into an under-recovery territory, and the snapshot is a complete reversal of conditions at the start of the year and even the middle of the month, where a petrol and diesel price cut was still on the cards.

The expected changes are as follows:

• Petrol 93: increase of 58 cents a litre;
• Petrol 95: increase of 52 cents a litre;
• Diesel 0.05%: increase of 33 cents a litre;
• Diesel 0.005%: increase of 22 cents a litre;
• Illuminating paraffin: increase of 38 cents a litre.

The main driver behind the higher local prices is the rising cost of international petroleum product prices, pushed higher by a stronger global oil price.

The increase would be worse by about 12 to 15 cents per litre if the rand wasn’t in a relatively strong position vs the US dollar. The currency exchange rate is currently contributing to an over-recovery of around that amount.

Oil prices, meanwhile, are contributing to a bigger under-recovery, ranging from 35 to 68 cents per litre.

Analysis by Bloomberg economists noted that oil has advanced in price as investors weighed the outlook for Chinese demand, while a weaker dollar made some commodities more attractive for buyers.

Oil prices hit 87$ a barrel on Thursday, as China made moves to reopen its slowing economy after dropping its zero-Covid stance.

The number of virus-related deaths and severe cases at hospitals in China is now 70% lower than peak levels in early January, authorities said late Wednesday. That should aid recovery in mobility and fuel consumption in the biggest oil importer.

Crude has also benefited from a slump in the dollar, with a gauge of the greenback near the lowest since April, Bloomberg said.

According to the Automobile Association (AA), the expected increases will put an even bigger burden on consumers who are already under strain due to the rising costs of living in South Africa.

“Any increases to fuel prices now, at a time when South Africans are grappling with, among other issues, financial pressures and rolling blackouts, is unwelcome. We again want to urge the government to revisit the fuel pricing structure with a view to finding ways to mitigate against this and other possible increases in future,” it said.

In addition to the expected increases for February, the AA warned the Minister of Finance will be delivering his Budget Speech in Parliament in mid-February, where potential fuel tax hikes might be announced.

Although the announcement of these taxes would be made in February, the actual adjustments would only come into effect in April. However, this will be at the same time Eskom’s 18.65% electricity price hike is planned to come into effect.

“Last year, the Minister heeded calls by the AA not to increase the two main levies attached to the petrol and diesel prices: the General Fuel Levy and the Road Accident Fund levy. We again urge the Minister to follow this same route when he delivers his Budget Speech this year and to consider the implications of increasing these taxes on all South Africans.

“Consumers can simply not afford any more price shocks, and considering the impending 18.65% increase to electricity rates, an increase to the levies will deal a massive blow to personal finances,” the AA said.

“Consumers continue to be extremely embattled and increases to the two fuel levies will be counter-productive, are ill-timed, and have disastrous outcomes for millions of people already struggling to make ends meet.”