File photo: ANA/Karen Sandison
File photo: ANA/Karen Sandison

April fuel price likely to drop by more than R1, even with tax hike

By Jason Woosey Time of article published Mar 13, 2020

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Johannesburg - Although it’s too early to predict next month’s fuel prices with a great degree of accuracy, a significant reduction is looking certain for April, and it’s likely to be more than a rand per litre, even with the looming fuel tax increases coming into play.

According to the latest data released by the Central Energy Fund, the average fuel price calculation for the month so far shows decreases of R1.11 a litre for petrol and R1.10 for diesel.

However, this average does not fully account for the most recent plunge in the price of international crude oil, which was trading at $32.70 a barrel at the time of writing.

What’s interesting to note is that the daily calculations released this week have all shown an 'over recovery' of more than R1.60 a litre for petrol, with the most recent one being as high as R2.29. What this means is that if current trends persist, that aforementioned daily average of R1.11 a litre is certain to grow, possibly to R1.50 or more - consider that at the beginning of this week, the average stood at 78 cents.

However, regardless of what the actual decrease is, the 2020 fuel tax increase that comes into effect at the beginning of April will take 25 cents out of the equation. 

Fuel taxes already account for almost 40 percent of the price motorists pay at the pumps, according to the Automobile Association, which means that South Africans will never feel the full effect of plunging international oil prices.

Another possible wild card is the rand, which has taken a big hit amid all the coronavirus uncertainty, but this has so far been outweighed by the far bigger plunge that oil prices have taken.

Either way, the balance of probability seems tipped towards decreasing fuel prices in the coming months, as the Automobile Association explains:

"There is little indication of what the final picture of COVID-19 spread will be, nor where the rand will stabilise against the dollar. It can also not be predicted how long the Saudis are prepared to hold out in their oil price war, since their oil industry is believed to be able to maintain profitability at substantially lower per-barrel prices than the current level.

 "It will take quite some time for the global economy to get back on an even keel after the current ongoing events, and the next two or three months seem set to provide some fuel price relief to hard-pressed motorists," the AA added.

IOL Motoring

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