One week after the South African government announced a change in its fuel-price policy by capping fuel-price increases for June, numerous requests to find out what the fuel-price policy will be after June have been unsuccessful, which begs the question as to whether there is in fact a fuel-price policy, or whether the government wants to keep it a state secret.
On June 1 2004, Minister of Minerals and Energy Phumzile Mlambo-Ngcuka announced that South African petroleum product price rises will be capped at 30 cents a litre and this policy will be maintained for “as long as possible”.
On May 20 the Department of Minerals and Energy announced that the government was concerned about the current and projected future increases and had requested the department to, within the limited resources, investigate options to cushion anticipated fuel-price increases.
“Should the options that are currently being investigated prove viable, consumer prices increases should be kept as low as possible for as long as possible,” the department said at the time.
Prior to 1991, the government changed the retail price of petroleum product prices only infrequently and some people are hoping that the announcement will herald a return to this policy, but South African financial markets have so far been kept in the dark whether this is in fact the case.
Specific questions to which there have so far been no response include the following:
- How large was the Equalisation Fund at the end of May and at what rate is the current eight cents a litre subsidy depleting this fund?
- What does the term “for as long as possible” mean?
- If not fixed for the next millennium, what under-recovery on the daily basic fuel price will prompt a retail price increase? What over-recovery will prompt a retail petrol price decrease? The over-recovery on June 7 was 38,833 cents a litre.
- Will other petroleum product prices such as aviation gas, LPG and bitumen be fixed/capped as well?
- If prices are fixed for the next 12 months, what will the impact be on gross domestic product and CPIX?
- What are the income and price elasticities of petrol and diesel?
- Will the Department of Minerals and Energy be fixing other energy prices such as coal and natural gas?
For a government committed to transparency and macro-economic stability, the lack of clarity provided by the Department of Minerals and Energy on fuel-price policy going forward is jarring.
The resounding silence from the department means that economists and policy makers at the South African Reserve Bank, which meets later this week to decide on monetary policy, are missing a crucial part of the inflation jigsaw puzzle. — I-Net Bridge