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July fuel price set to rocket to all-time record high of R25 a litre

Another fuel price will hit the cash-strapped consumer today. Picture: Ian Landsberg (ANA)

Another fuel price will hit the cash-strapped consumer today. Picture: Ian Landsberg (ANA)

Published Jul 5, 2022

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It does not rain for South African motorists and consumers, it pours.

This follows a record high fuel price increase of more than R2 per litre for July, which saw the price of petrol breaching R25 per litre for the first time ever from tomorrow.

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The Department of Mineral Resources and Energy yesterday delivered the blow and announced that the price of petrol for both 93 and 95 octane will increase by a massive R2.37 and R2.57 per litre from midnight, respectively.

This means that the price for 93 octane will rise from R23.93 to R26.31 per litre, while 95 octane will surge from R24.17 to R26.74 per litre.

This is nearly R10 per litre more than a year ago.

Diesel will increase by between R2.30 and R2.31 per litre to an overall price of R25.53 per litre, while the wholesale price of illuminating paraffin will rise by R1.66 per litre.

However, the maximum LPGas Retail Price will go down by R2.18/kg.

The department said the main reasons for the increase were the rising Brent crude oil prices due to Russia’s war in Ukraine, and the appreciation of the rand against the dollar during the period under review.

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The addition of the general fuel levy and the Road Accident Fund levy that were halted as short-term relief measures to mitigate the fuel price increases, also added to this month’s hike.

Fuel prices in South Africa have risen 20 percent since the beginning of the year, and around 40 percent from a year ago, due to Russia’s invasion of Ukraine; strong consumer demand; and weak supply.

Automobile Association spokesperson Layton Beard said a R2.50 increase to the price of fuel was right up there with the highest the country has ever had.

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Beard said the way that this was going to fall into the economy was that everything was just going to become that much more expensive.

“You might not see it immediately in the individual prices, but the cumulative effect of all of these increases is certainly going to hit already embattled consumers very hard, and we will see that having an impact further down the line. The economy as a whole is going to take a knock because of this,” he said.

“As long as the situation in Ukraine remains unresolved, we are going to be stuck with these problems and we are already beginning August on the back foot. But certainly, I think the outlook at the moment is not positive.”

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The latest increase comes six months after Finance Minister Enoch Godongwana announced in December, 2021 that the government would consider reforming the way the fuel price is calculated.

The government has taken a hit of nearly R15 billion in tax revenue in trying to soften the blow for consumers by offering a temporary relief of R1.50 per litre since April, but that has been reduced to 75 cents per litre in July until August 3.

The Organisation Undoing Tax Abuse’s (OUTA) chief executive Wayne Duvenage said they were disappointed that the fuel levy discount had not been extended.

“Clearly the tax revenue shortfalls have negated government’s ability to continue with the relaxation in the fuel levy,” Duvenage said.

“We are now paying the high price of weak economic policy that has given rise to the South African currency punching well below its potential, combined with high taxes and levies applied to petro,.” he said.

Dawie Roodt, the founder and chief economist of the Efficient Group, predicts that inflation will rise from the current 6.5 percent to 7.5 percent soon, leaving the SA Reserve Bank with no option, but to hike interest rates by 50 basis points.

“The reality is that South Africa is heading for a technical recession, a term used when a country has had negative economic growth for two consecutive quarters,” Roodt said.

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