Several factors attributed to significant fuel price increase

Reading Time: 3 minutes

Motorists will pay more for fuel from Tuesday night. The Department of Mineral Resources and Energy has confirmed that the price of both grades of petrol will increase by 75 cents per litre. The diesel price will increase by between 70 and 75 cents per litre while illuminating paraffin is going up by 71 cents per litre at the retail level.

The department has attributed the latest increase to the current geopolitical tensions in the Middle East that are affecting the transportation of oil and the weaker rand/dollar exchange rate.

The extreme cold weather in the United States is also listed among the reasons for the recent fuel price hike.

The Department of Mineral Resources and Energy (DMRE) says this impacted production, which resulted in more-than-expected inventory draws. The department releases the adjusted fuel prices monthly.

These prices are informed by international and local factors because South Africa imports both crude oil and finished products at a price set at the international level, including importation costs.

“The reasons for these increases are the higher oil prices because of attacks on the oil cargoes in the Red Sea and the cold weather that affected oil production in the USA during the period under review. The rand weakened against the US dollar during the same period. In line with the provision of the self-adjusted fuel levy mechanism rules, this late label on petrol and diesel will remain at zero cents per litre with effect from the 7th of February 2024,” says DMRE spokesperson Robert Maake.

Market analysts say geopolitics may be a factor in fuel price hikes, however, this is not too concerning.

“The geopolitics side of it, I think we actually need to be similar levels to when things started unfolding last year. So, it’s definitely a factor. But I think the things that you maybe look it up, playing a bit more of a role now on kind of pushing oil upwards at the moment is the fact that there’s concerns. Around global growth and specifically around another hawkish. From the bid as well as supply coming back on board in the US, both of those things are going to put a kind of dampener on oil prices,” says Martin Smith, portfolio manager at Anchor Capital.

The DMRE says there will be no slate levy implemented in the price structures of petrol and diesel in February. It says this is due to the cumulative slate balance on petrol and diesel at the end of December last year which had a positive balance of 1. 1 million.

Despite the latest fuel increase, inflation is expected to continue its downward trajectory in the coming months. And the market is already pricing in a rate cut later this year.

Video: Fuel Price – Pinch at the pumps for motorists