State says fuel price increase out of its hands

The department of energy has stressed the recent drastic increase in fuel prices is out of the government’s hands and has urged South Africans to be more fuel efficient.

At a press briefing in Pretoria on Tuesday, Minister of Energy Dipuo Peters explained the factors that have contributed to an increase of 73c per litre, which comes into effect at midnight on Tuesday.

Peters acknowledged that increases were impacting negatively on all South Africans. “While the department is committed to fulfilling its mandate of ensuring that energy is accessible to consumers at the lowest possible costs, it is not within the powers of government to dictate market fuel prices,” Peters said.

“Rather, fuel prices are set in line with global market issues such as geopolitics, currency strengths, and speculator activity. South Africa is a price taker.”

Peters said there were several factors working against the global oil price:

  • A stronger global economy has pushed risk markets, including commodities like oil, higher;

  • The introduction of the Iranian oil sanctions and the risk of an Israeli attack on Iran’s nuclear facility;

  • Increasing attacks on oil infrastructure in Iraq after the withdrawal of US troops;

  • The Japanese oil use for power generation has been increasing significantly since the March 2011 earthquake and the subsequent shutdown of their nuclear reactors; and

  • The closures of refineries in the US east coast, the largest regional petrol market in the US, has led to increased reliance on imports from Europe, thus impacting on the Mediterranean prices that contribute 50% to the basic fuel price.

But locally, several other costs have pushed the petrol price upwards.

Minister of Finance Pravin Gordhan, in his budget speech in February, announced the fuel levy and the road accident fund levy on petrol and diesel will increase by 20c per litre and 8c per litre, respectively, with effect from April 4.

Revised pipeline and road transport tariffs are also implemented into the price structures of petrol, diesel and illuminating paraffin with effect from April 4. The pipeline transport tariffs are set by the National Energy Regulator of South Africa and the road transport tariffs were set in line with the vehicle costs schedule of the Road Freight Association.

On the upside, the average Rand/Dollar exchange rate strengthened when compared to the previous period and decreased the contribution to the basic fuels price on petrol, diesel and illuminating paraffin by at least 5c per litre.

Peters said motorists would not be the only ones to suffer. “The impact of the increasing pump prices for fuel inevitably has a spiral effect that leads to increases in the price of other commodities such as food which is transported to consumers by road, rail or air.”

Peters urged South Africans to be more fuel efficient by carefully planning their trips, avoiding speeding, and using public transport whenever it is practically possible. Lift clubs, she said, can also go a long way in reducing the transportation costs for individuals.

Lisa Steyn

Lisa Steyn

Lisa Steyn is a business reporter at the Mail & Guardian. She holds a master's degree in journalism and media studies from Wits University. Her areas of interest range from energy and mining to financial services and telecommunication. When she is not poring over annual reports, Lisa can usually be found pottering about the kitchen. Read more from Lisa Steyn

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