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A big petrol price hike is coming next week

| Economic factors

South African motorists are set to be hit with yet more steep fuel price hikes going into March, the Automobile Association (AA) warns.

Commenting on unaudited month-end fuel price data released by the Central Energy Fund, the association said although the rand performed well against the US dollar during February, gaining around 14 cents, it was far below what was needed to offset the climb in oil prices.

As a result, fuel users can expect to see petrol up by around 66 cents a litre, diesel up by 57 cents, and illuminating paraffin up by 49 cents.

“The international oil price seems unstoppable. We are in an eight-week streak of price climbs with no sign yet of a ceiling,” the AA said.

The association said that increased economic activity made possible by the global rollout of the Covid-19 vaccine has lead to increasing demand and higher prices. It also cited the impact of Saudi Arabia’s surprise cut, effective from February, of one million barrels of oil per day from its production targets above and beyond its OPEC commitments.

“On top of this, the USA’s domestic oil production tailed off in the wake of the petroleum glut at the height of the Covid-19 first wave in 2020, but information from the US Energy Information Administration (EIA) is showing that US inventories have dropped back into a normal range,” the AA said.

It added that if US production doesn’t catch up with the falling inventory, the oil price will come under further pressure, noting that the per-barrel prices of crude had almost recovered to their pre-Covid-19 levels.

“Until oil supply and demand settle into stability, more hikes are likely. And, we cannot forget that April will already start with a significant addition of 26 cents a litre to fuel prices because of increases to the General Fuel and Road Accident Fund levies – inflicting further blows to already battered South African consumers,” the AA said.

Budgetary increases

In its 2021 budget on Wednesday (24 February), the National Treasury announced an increase in the general fuel levy and Road Accident Fund levy to take effect from 7 April 2021.

The increase will see motorists pay an inflation-related increase of 15 cents/litre in the general fuel levy and a higher-than-inflation increase of 11 cents/litre in the Road Accident Fund levy

Currently around 38% of the current petrol price – roughly R5.88 – is made up of these two taxes. The latest tax increases will take this closer to R6.15, Treasury said.

This is how the expected prices would reflect:

Fuel (Inland) February official March expected
95 Petrol R15.67 R16.33
93 Petrol R15.50 R16.16
0.05% Diesel (wholesale) R13.58 R14.15
0.005% Diesel (wholesale) R13.61 R14.18
Illuminating Paraffin R7.99 R8.48
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