Consumers over a barrel as fuel price soars

Dawie Roodt, chief economist at the Efficient Group, said there was a lag effect because the full effect of a weaker rand against the dollar had not yet fed through to the fuel price.

“We can expect a further rise in fuel prices next month,” he said.

The petrol hike was accompanied by an 69c/litre increase in diesel prices. Together, they could add an estimated R1.58-billion to South Africa’s fuel bill this month, according to the South African Petroleum Industry.

In August, South Africans spent about R20.5-billion on fuel. The country consumed an estimated 970-million litres of petrol and an estimated 980-million of ­diesel.

An estimated 40% of petrol, or 388-million litres, was consumed at the coast and an estimated 60%, or 582-million litres, was used inland. Roughly 392-million litres of diesel was used at the coast and 588-million litres inland.

Assuming the same patterns of consumption for September, consumers are likely to spend R22.1-billion filling up their vehicles.

The price of 95-grade unleaded petrol in Gauteng is R11.97/litre and wholesale diesel costs R10.95/litre, according to the Automobile Association of South Africa. At the coast the same product will cost you R11.58/litre and R10.70/litre.

The cost of crude oil affects that of refined fuel and increases in crude oil prices contributed to the petrol price hike, said Avhapfani Tshifularo, executive director of the South African Petroleum Industry.

A number of factors had contributed to rising crude oil prices, which on September 5 had reached $113/barrel. They included the possibility of conflict in the Middle East, tension between Israel and Iran and the ongoing Syrian conflict.

South Africa reportedly stopped crude oil imports from Iran last month as pressure from the European Union and United States mounted and began sourcing from other oil-producing regions. Unplanned outages at US and Asian refineries had also affected petrol markets, said Tshifularu.

The rand could see further weakening because of what Roodt termed the “Marikana effect”.

Following growing labour unrest at several local mines, Roodt warned that nervous foreign investors could accelerate their sale of South African bonds and this would negatively affect the rand.

Pressure on crude
Vuledzani Ndou, economist at, said that events such as the recent hurricane in the Gulf of Mexico and elevated levels of political strife in Nigeria, one of Africa’s largest producers, had also put upward pressure on crude prices.

The northern hemisphere was entering winter, generally associated with increased consumption, which would also contribute to rising prices, she said.

The petrol hike is likely to affect consumer inflation. Food inflation is already on the rise, thanks in large part to a drought in the US.

About a quarter of the petrol price is made up of taxes and levies, including a fuel levy, customs and excise duties and a road accident fund levy. These charges are added to the basic fuel price of petrol, which constitutes 58%, or R6.98, of the price.

A number of marginal costs go to the dealers, retailers and wholesalers and a transport cost is added to the price of petrol inland for shipping fuel from the coastal refineries.

The minister of energy recently approved an increase in the retail margin, from 91.8c/litre to 95.3c/litre. This was so that service station operators could finance wage increases, which had been agreed to with the motor industry bargaining council in September 2010.

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Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

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