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Fuel price relief could be short-lived

Industry news

With just a few days to go in April’s fuel price calculation cycle, it is now a certainty that South African motorists will enjoy some relief at the pumps next month, but the joy could be short-lived if politics keep the rand on the backfoot.

While April’s official fuel price movements will be announced this Friday, the Automobile Association is predicting a petrol price decrease of around 24 cents a litre and a drop in diesel costs to the tune of 9 cents a litre, based on the latest available data.

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This is in spite of the 39 cent a litre fuel tax increase that comes into effect at the beginning of April, as announced during the Finance Minister’s Budget Speech in February. In fact, had that not been the case, South Africans would have enjoyed a price cut exceeding 60 cents.

"International petroleum prices continued to ease during March on the back of increased global oil stocks which have mostly blunted Opec's recent production restrictions. Over the same period, the rand performed strongly against the US dollar, notwithstanding recent events," the AA said.

However, Monday’s calling off of Treasury’s international roadshow by the Presidency has sent the local currency into a tailspin and any further potential shocks, such as a much-rumoured cabinet reshuffle and potential axing of Finance Minister Pravin Gordhan, would undoubtedly cause further carnage for the rand, resulting in higher fuel prices from May onwards. 

This would hit the poorest South Africans hardest, not only with regard to the paraffin needed for heating, cooking and lighting, but because fuel prices and the resulting transport costs have an impact on all consumables.

"In our view, the Presidency was ill-advised to call off the Treasury's international roadshow at such short notice with so little detail given,” the AA commented. “The resultant sharp weakening of the Rand again demonstrates the importance of political and fiscal stability to investors."

IOL Motoring

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