Blow to consumers as fuel price hits historic high

(Delwyn Verasamy/M&G)

(Delwyn Verasamy/M&G)

September’s gentle fuel increase is a distant memory as motorists are set to be hit with a more than R1 increase from midnight on Tuesday.

The department of energy has attributed the increase to the weakening rand exchange rate, the increased prices of crude oil and the import prices of petroleum.

Although both crude oil prices and the price of petroleum products increased during the year, the weakened rand contributed to a 50c/l more to the basic fuel price for petrol and 52c/l for diesel and illuminating paraffin.

Petrol grades 93 and 95 (ULP & LRP) will increase by 99 cents and R1 a litre respectively.

Diesel 0.05% sulphur and diesel 0.005% sulphur will both increase by R1.24 a litre.

The overall retail price of 95 ULP for motorists the inland provinces, like Gauteng, will be R17.08 c/l and R16.49 c/l in coastal regions.

The Automobile Association (AA) had expected this increase, warning motorists in a press release that fuel prices were expected to be “catastrophic” in October — “making them the biggest in South African history”.

The AA believes the fuel price increase will “extract a further R2.5-billion a month in transport costs from an economy that is already on the ropes.”

Last month, economist Mike Schussler had warned that the 5c/l in September was a short term solution because the government had not changed any of the other factors that pertain to the petrol price.

September’s petrol price only increased by 5c/l following an emergency announcement by the department of energy.
Neither diesel nor paraffin saw a price increase that month.

The petrol price consists of the basic fuel price (BFP) and “government-controlled’ taxes consisting of the fuel, customs and excise, the road accident fund, the Slate Levy and retail levy among others.

Breakdown: Why is petrol so pricey?

Since 2016, when crude oil was below $30 a barrel, the prices of crude oil have more than doubled. They now rest at around $80 a barrel.

According to a presentation made by the department of energy in August, the main causes of the high fuel prices are the geo-political instability in Venezuela and Libya — both key Organisation of the Petroleum Exporting Countries (OPEC) members. Venezuela has seen its oil production nearly collapse and since the government change in Libya in 2011, oil production has been intermittent. Libya went from producing 1.5-million barrels a day to an average of 600 000 barrels.

US President Donald Trump’s decision to withdraw the US from the Joint Comprehensive Programme Action in May has led to sanctions on Iran and embargo on Iranian oil exports — Iran is a major oil producer at 1 000 barrels a day.

To add to the increase in the basic fuel price, the department of energy noted in the same presentation that there has been an increased demand of 1.5-million barrels of crude oil a day.

Gemma Ritchie

Gemma Ritchie

Gemma Ritchie works in the Mail & Guardian's online department. She majored in English Literature at a small liberal arts college in the USA.  Read more from Gemma Ritchie

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