The Automobile Association says fuel price increases announced by the Department of Mineral Resources and Energy on Monday, will keep fuel prices at record high levels.
This is despite a reduction in the general fuel levy by 150 cents a litre. The association says this means tax now stands at R2.44 cents down from its current R3.94 cents.
It says the price of petrol is still increasing across the board and could have been worse had it not been for the reduction.
“The intervention to cut the levy is welcomed as it shows the government is taking the issue of rising fuel prices seriously. It has also indicated that it is looking at several proposals to deal with rising fuel costs in the future. Whatever plans the government is considering though, should be fast-tracked as the trend of increasing fuel prices is likely to continue in the short to medium term especially as the situation in Ukraine remains unresolved, as it is adding pressure to the international product prices and in turn to local prices,” says AA spokesperson Layton Beard.
The price increases
The government says the price of both petrol and diesel increase would have been close to between R2 and R3 per litre respectively if there was no intervention.
The Department of Energy has announced that 93 Octane will go up by 28 cents per litre and 95 Octane by 36 cents at Tuesday midnight.
Diesel will see the steepest increase by between R1.52 cents per litre and R1.68 cents per litre.
The department says crude oil prices averaged increased from 96. 47 to 109. 37 US Dollars during the period under review.
Although the Rand appreciated during the period under review, continued sanctions imposed on Russia have led to escalating oil prices.
“Petrol 93 will increase by 28 cents per litre and 95 Octane by 36 cents. Diesel will increase by 152.56 cents per litre and 168.56 cents per litre. Illuminating paraffin will increase by R3.55 cents at the retail level. The main increases for these are as follows, firstly the higher oil prices, due to Russia/Ukraine conflict. Fuel demand concerns in China due to the lockdown, and the fact that the Yemen rebels are targeting storage facilities in Saudi Arabia,” says Department of Energy’s Robert Maake.
Economists warn international oil prices could further increase
Economists say the reduction of the fuel levy over the next two months has helped contain the increase in local fuel prices. They have however warned that international oil prices could further continue to increase if tensions between Russia and Ukraine are prolonged.
” But of course, a lot depends on what might happen over the next two months and we are talking here international oil prices. We have seen the rand working in our favour, helping to contain the impact of the high international oil prices. What we hope for over the next few weeks is that oil prices will come down, actually come down enough to really result in the reduction of basic fuel prices because that is what really matters,” says Nedbank Economist Isaac Matshego.
Senior Research Fellow and Political Economist at Think Tank, Trade Collective speaks about high inflation caused by increase in oil prices: