This Wednesday, 6 September, fuel prices in South Africa are expected to see considerable hikes of up to R1.65/litre for petrol and R2.85/litre for diesel.
The expected increases are largely being driven by higher international oil prices which have risen on the back of slow demand and decreased output.
This is anticipated to continue until October, as reports from Reuters suggest that Saudi Arabia, the world’s biggest oil exporter, is planning to extend its voluntary output cut of one million barrels per day for at least the next two months.
Higher international oil prices are contributing between 80% and 88% to the expected increases for September, anywhere between R1.31 to R2.53 per litre depending on the type of fuel, with the weaker Rand/US Dollar exchange rate contributing the rest.
The movement of the exchange rate from an average of around R17.80/dollar at the start to over R18.60/dollar at the end of August tacked on another 29-32 cents per litre.
With this taken into account, fuel prices in South Africa this Wednesday are expected to be adjusted as follows, according to unaudited fuel price data released by the Central Energy Fund:
- Petrol 93 – Increase of R1.60 a litre
- Petrol 95 – Increase of R1.65 a litre
- Diesel 0.05% – Increase of R2.85 a litre
- Diesel 0.005% – Increase of R2.76 a litre
Keep in mind that these are not the official changes that will be made by the Department of Energy this Wednesday, which could differ due to any potential changes in the Slate Levy, taxes, transport costs, or wholesale and retail margins.
Road Accident Fund comes under fire
Economists from the South African Reserve Bank (SARB) in August released a special research report in which, among others, they called for a review of the viability of the Road Accident Fund (RAF) against alternative approaches such as mandatory third-party insurance.
It noted that the RAF, which shields underinsured and non-insured motorists from damages arising from road accidents, is one of the “most unusual aspects” of South Africa’s fuel price structure because there are very few comparable schemes of this kind in other countries, and it has been one of the main drivers of rising costs in recent years.
“While the issue of compulsory third-party insurance needs further, deeper discussion, we concur with the researchers that there is institutional failure at the RAF, and that ‘the rising cost of the RAF levy means that the additional cost to petrol prices has rapidly eroded the cost-benefit for drivers relative to mandatory private insurance’,” said the Automobile Association (AA).
“The RAF secures around R42 billion in funding annually through the RAF levy on fuel, but citizens derive little benefit from their contributions.”
With this in mind, the AA has sent an urgent call to the powers that be to review the RAF levy, which currently comprises R2.18 on every litre of petrol and diesel sold in the country, and intervene wherever possible to reduce its impact on cash-strapped motorists.
It notes that the voluntary publication of the review of the petrol price by the SARB is an important and significant development, and that government must seriously consider its findings.
“South Africans remain financially constrained, and the outlook is bleak for many millions of people,” said the AA.
“While there are many economic challenges to overcome, the Association believes dealing effectively with the fuel price, and introducing sustainable measures to mitigate against rising fuel costs, is a vital part of beginning to address those challenges.”
Keyword: Fuel price hikes up to R2.85 per litre expected for South Africa this Wednesday