Prepare for a steep petrol price in September.
 Photo: Ian landsberg
JOHANNESBURG - Consumers are in for a shock in September as it is expected that petrol, diesel and illuminated paraffin prices will increase sharply.

Both the factors that determine to a great extent the prices for fuel at the pump, namely the landed international price as well as the rand exchange rate, have turned to the upside since the Central Energy Fund announced the adjustments at the beginning of August.

The combination of these two has pushed the under-recovery for petrol, diesel and paraffin to levels between 40 cents and 61 cents per litre since July 28.

An under-recovery means that if the international oil price and the rand/$ exchange rate remain at their current levels, the prices for fuel will increase by those margins during the first week in September.

For petrol 95, the under-recovery between July 27 and August 17 was 61c/* .


Of this, the landed international price contributed 56c and the weaker rand 5c.

For petrol 93, the under-recovery over the same time period was 58c, while the change in the international import price contributed 53c.

The price for diesel is currently 49c, under-recovered with the international landed price for diesel contributing 44c/* . The price for illuminated paraffin is 53c/* under-recovered.

These expected increases follow increases of 19c/* for petrol, 29c/* for diesel and 35c/* in the retail price of paraffin on August 2.

If the fuel prices increase by the current under-recovery values in two weeks’ time, the petrol price of 95 octane in Gauteng will then cost R13.66/* .

This is 149c/* higher than the R12.17/* on September 27 last year. This is an increase, year-on-year, of 12 percent.

At the coast the price will increase to R13.16/* . For diesel the price will increase to R11.75/* in Gauteng. This is an increase of 126 c/* and also 12 percent per litre on the R10.49c/* of a year ago.

At the coast the price for diesel will increase to R11.36c/* .

Given the big weight of 4.6 percent, the price for fuel contributes to the inflation rate. Such a large increase (year-on-year) is likely to have a big effect on the overall inflation rate in September. This may contribute towards a decision by the the SA Reserve Bank not to decrease the repo rate soon.

Chris Harmse is the chief economist at Rebalance Fund Managers