July's fuel price rise likely to be less than expected
Johannesburg - South African motorists can expect a momentary slow-down in the soaring price of fuel in July, thanks to a significant decline in oil prices during June.
Without the fall in the price of oil, says the Automobile Association, the unaudited month-end fuel price data released by the Central Energy Fund would have painted a far bleaker picture.
The oil price, which determines how many dollars South African fuel companies have to spend to buy a barrel of crude oil, and the exchange rate, which determines how many rands each dollar costs, are the two primary factors that influence local fuel prices from month to month.
“At the beginning of June the rand was at about R12.65 to the dollar,” said AA spokesman Layton Beard, “but it has slipped in a virtually straight line since then to nearly R13.30. Luckily for us, the oil price has dropped at almost the same rate, so we should see a fairly moderate price rise on the first Wednesday in July.”
The AA expects price of petrol to rise by about 26 cents a litre, diesel 24 cents and illuminating paraffin 20 cents - but warns that any recovery in oil prices in the months to come could have serious implications for South African motorists if the rand continues to slide.
“If the average price of oil had remained steady in June, instead of dropping,” said Beard, “price increases of 40 cents a litre would have been likely for July. And if it gone up the way it did in May, the increase would have been nearly 80 cents."
Where does that leave us?
If the AA is right, 95 octane petrol inland will top the R16 a litre mark when the department of energy makes the formal fuel adjustment announcement on Friday. The price of 93 octane petrol inland will go up to about R15.80 a litre and at the coast, 95 octane petrol will hover around R15.30 a litre.
But the AA is expecting further fuel price hikes, with the rand being pushed down by South Africa’s weak economic position and international oil prices likely to be pushed up by tariff disagreements between the United States and its trading partners.
Given that about a third of what we pay for petrol - currently R5.30 a litre - goes towards the General Fuel Levy and the Road Accident Fund Levy, the AA has again urged government to reconsider the high cost of the added taxes.
“Private-sector wage hikes are low this year,” said Beard, “and the cost of living is going up. The expense of commuting by car could rise beyond many motorists' reach, and people who would never have considered public transport or carpooling may soon have no option."