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Petrol price earmarked for another hike in May

| Economic factors

By: Siphelele Dludla – IOL Business Report

THE Automobile Association (AA) has warned of another petrol price hike in May that will push the cost of living even higher for financially-constrained consumers, as inflation also remained sticky above 5% in March.

The AA yesterday said that current unaudited data from the Central Energy Fund (CEF) indicated the petrol price would again increase by 37c/litre in May, pushing the price close to R25.15/l from the current R24.78/l.

The transport index on the headline inflation print already rose by 2.0% between February and March, mainly due to a monthly rise of 5.3% in fuel prices in March when petrol increased by R1.21/l, and diesel by R1.06/l and R1.19/l, respectively.

South African fuel prices have reached record-high increases over the past three years despite the government not increasing the General Fuel or Road Accident Fund (RAF) levies.

This year, the petrol price has already risen from R22.17/l recorded in January on higher Brent crude oil prices as a result of geopolitical risk or attacks on oil cargoes in the Middle East, particularly the Red Sea, and the depreciation of the rand against the US dollar.

The price of unleaded 93 petrol inland in May 2022 cost R21.51/l, but increased to R23.01/l in May 2023.

In a statement yesterday, the AA said the outlook for unleaded 95 inland was not much better, with the CEF data showing an increase of 38c/l.

It said this will push the price of this fuel to around R25.50/l, higher than that R25.42/l seen in August 2022, but not quite the record price of R26.74 in July that year.

Despite this bad news, the AA said diesel was set to decrease by 35c/l while illuminating paraffin was also set to come down by 28c/l.

“The decrease to diesel prices is especially welcome as it will not result in higher input costs across various sectors, and this won’t be a driving factor in consumer prices increasing,” it said.

The AA also said a review of the data showed that the expectant increases in this cycle were a result of fluctuations in international product prices that took a sharp upward trajectory at the beginning of the month.

It said the relative stability of the rand against the dollar in the early part of the month was contributing only a small margin to the expected increases.

“However, with tensions ramping up in the Middle East, the local currency could be under significant pressure going into the last two weeks of April and could have a more significant impact on local fuel prices in May,” said the AA.

“At this stage it’s important to keep an eye on that indicator as we head into the new month.”

The association ended by saying that it expected the increases to reaffirm its belief that a review of the fuel price structure was necessary to establish if any components within the current pricing model can be revised by the Department of Mineral Resources and Energy to mitigate against rising costs.

In 2022, Mineral Resources and Energy Minister Gwede Mantashe said he was having discussions with Finance Minister Enoch Godongwana to review the pricing methodology for petrol after the conflict between Russia and Ukraine drove up crude oil prices to $100 a barrel.

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