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Fuel price hike to put more pressure on struggling economy

Motorists will pay R26.31 a litre from Wednesday. Picture: ANA Archives

Motorists will pay R26.31 a litre from Wednesday. Picture: ANA Archives

Published Jul 5, 2022


Cape Town - The increase in the fuel price, announced by the Department of Mineral Resources and Energy (DMRE), will hit consumers hard and put more pressure on the struggling economy, the Automobile Association (AA) said on Monday.

The increase announced by Minister Gwede Mantashe sees 95 ULP rise by R2.57, pushing the cost to R26.74, while an increase of R2.37 to 93 ULP will see consumers pay R26.31 a litre.

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The inland wholesale price of 500ppm diesel will be R25.40 and 50ppm diesel will cost R25.53. This is nearly R10 per litre more than a year ago.

The adjusted fuel prices are effective from Wednesday.

AA spokesperson Layton Beard said the adjustments announced by the DMRE would push the prices to all new record-highs.

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Beard said that according to data, the movement in international petroleum prices was the main driver behind the increases.

“The value of the rand appreciated, on average, against the US dollar in June, resulting in a saving of around 20c/litre to the increases, without which the basic increases would be higher.”

Beard said a major factor in the increase of international petroleum prices remained the conflict in the Ukraine which was contributing to supply and demand pressures.

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In addition, the R1.50 relief from the General Fuel Levy, given by the government for May and June, was halved for July which added to the increases.

“This, and other increases announced (yesterday), will certainly negatively impact all South Africans and will, undoubtedly, play a big role in the economy.

“We understand that the government has little leeway in terms of international petroleum prices and the rand/US dollar exchange rate, which is why we have called, and will continue to press, for a review of the fuel price, an area where the government has control over the fuel price.”

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Beard added that a fuel price review needed to be initiated with urgency.

Motor Industry Staff Association chief executive, Martlé Keyter said the union has been asking the department, since March 2022, to be included in the fuel pricing methodology process and got written confirmation that it would.

“Government wanted to review the fuel pricing methodology long before Russia's war in Ukraine that resulted in the skyrocketing of the Brent crude oil price. There is no time to waste. To make matters worse Eskom is plunging the country into unprecedented stages of blackouts, costing the crippled economy billions. The fuel price and Eskom combined has a devastating impact on every South African. We are bound to see inflation rising. Inflation was recorded at 6.5% in May 2022, up from 5.9% in April 2022.“

Legal expert, Michael Bagraim said employees already spend up to 30% of their salary on transport and the increases will make things worse.

“Unemployment in South Africa is now the highest in the world. We are having extra pressure with regard to the electricity blackouts and the various problems bestowed on small business. When you add the fuel increase to this mix you have a very volatile situation.

Some employees are already saying that it has become ridiculous because with transport another expenses coupled to employment makes it almost useless to continue with a particular job. Salary increases do not commensurate with the cost of living increases,“ he said.

Cape Times