More fuel pain as oil climbs, but encouraged by government initiative

AA Fuel price announcement


Further substantial fuel price hikes are lined up for the end of October, based on the unaudited mid-month fuel price data released by the Central Energy Fund.


International oil prices remain stubbornly high and it is possible that current tensions involving Saudi Arabia, one of the world's biggest oil producers, could place more pressure on fuel prices. More welcome news is that the Rand is working in South African's favour, and the recent firming of our currency against the US dollar has taken some of the bite out of oil's rally.


However, the potential price hikes are still daunting, especially for diesel users. Petrol prices are currently set for a 40 cents-a-litre increase, while diesel and illuminating paraffin could spike by 70 cents and 65 cents respectively.


The predicted increase to the price of petrol must, for the moment, be seen against the backdrop of the Department of Energy’s (DoE) proposal to set a maximum price for the sale of 93 octane ULP and LRP fuels. Should this happen, it will allow fuel retailers to set their own prices below the maximum amount indicated by the government, and may, depending on the margins, ease the burden on users of the two identified fuels. It must be stressed, however, that we did not participate in the drafting of the proposal, so details on its possible implementation remain unclear to us.


We do, however, welcome government’s efforts on the issue of rising fuel prices, and that the Department of Energy has requested input from industry stakeholders. It says the proposal looks to be consumer-friendly, and that the detail will clarify how this will work once all the feedback is received. The country cannot continue to be hammered by large fuel price hikes without severe economic knock-on effects.


The effect on bus and taxi operations could lead to fare hikes which exceed commuters' ability to pay. We again call on the government to prioritise economic policies which inspire investor confidence. A stronger and more stable Rand is the country's only defence against the vagaries of the international oil price.