R20 a litre for petrol before year end is looking plausible, AA says
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Johannesburg - South African motorists are potentially facing fuel price increases of “catastrophic proportions”, with diesel looking set to see its largest hike ever, the Automobile Association said.
As we reported on Monday, unaudited mid-month data is pointing towards a petrol price increase in the region of R1 per litre, while diesel and illuminated paraffin are looking set to rise by around R1.40. This would bring the price of a litre of 95 Unleaded up to around R18.60 at the coast and R19.33 in the inland regions.
"The hikes in diesel and illuminating paraffin would be the largest in South African history, bearing in mind that this is only based on half a month's data,” the AA said. “R20 a litre for petrol is now a realistic scenario before the end of 2021".
The association said it saw little hope of improvement in the fuel price situation before the end of October, with Brent Crude having recently broken through the $85 per barrel mark. Despite US President Joe Biden having called on the OPEC+ oil cartel to raise output with the hope of stabilising prices, the AA does not expect the oil price situation to improve in the short term.
The association has also raised concerns about upcoming changes to the Slate Levy for South African fuel.
"The under-recovery to date this month has been vast, and the government will, in our view, have no option but to increase the Slate Levy to recover this deficit, making for a bigger hike," the AA said.
"South Africans are paying at the pumps for weak governance, as one of the key indicators of the price of fuel depends on the exchange rate".
The rand was trading at R14.56 at the time of writing, which is still far above its relative strength in June, when it traded below R13.50.
30% inflation in just one year
To put South Africa’s fuel price situation into perspective, consider that in January this year a litre of 95 Unleaded petrol cost R14.16 at the coast and R14.86 in the inland regions. If the November fuel price prediction rings true, this will see motorists and commuters paying 30% more for petrol than they did at the beginning of the year, and 56% more than they did five years ago.
Adding insult to injury is that taxes and levies account for R6.11 of every litre of fuel sold in South Africa. And high fuel prices don’t only affect the cost of commuting, but also the price of food and all other essential items that require transportation.