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SECOND MAJOR FUEL PRICE HIKE IN ONE MONTH HITS SOUTH AFRICANS HARD

by | Dec 1, 2021 | Personal Finance

Another fuel hike – and SA consumers are feeling the pinch. Just weeks after the previous hike left us reeling, consumers will now pay a further 81 cents more per litre of petrol, and up to 75 cents more per litre of diesel. With a further 42 cents increase in illuminating paraffin, those who use it for lighting, heating and cooking will be especially hard hit.

Sebastien Alexanderson, CEO of National Debt Advisors (NDA), says: “SA consumers have been dealt a second hard blow – before they’ve even had a chance to come to grips with the first. As most South Africans are already struggling to make ends meet, another petrol price hike will see them having to once again dip into their already limited disposable income, just to keep their heads above water.”

Petrol price increases push up the price of all other commodities and therefore the cost to produce and transport raw materials rises. This is then reflected in the cost of everyday necessities like bread, milk, maize – and virtually anything and everything on store shelves.

Alexanderson goes on to highlight that the most financially vulnerable often live far away from city centres and work hubs. “This makes transport costs a huge part of their budgeted expenses. A petrol price increase will most likely lead to an increase in the price of public transport costs – something which struggling consumers can ill afford right now.”

 

The price of oil plays almost no part in the rising fuel cost which has hit South Africa

This is according to the Automobile Association (AA), which was commenting on price increases announced by the department of mineral resources & energy (DMRE) on Monday, and which come into effect at midnight on Tuesday.

The association says the increases again point to the need for an urgent investigation and recalculation of the current fuel pricing model and its existing elements.

Petrol across all grades will rise by 81c/l, crashing through the R20/l barrier for the first time to reach R20.13 for a litre of 93ULP and R20.35 for 95ULP. Diesel will rise by as much as 75c/l, and illuminating paraffin by 42c/l.

“This price disaster is entirely home grown. Internationally, oil prices have pulled back from their recent highs and Brent crude is currently trading around $75 a barrel. The majority of this month’s under-recovery is because of the weakening of the rand against the US dollar,” the AA said.

The AA said that while the rand had lost value against the dollar after the discovery of the Omicron variant, the underlying weakness was a continuation of a trend that began with the midyear riots and looting.

Fuel price increases/decreases January to December 2021.
December 2021 Fuel Increase

“In under six months, SA has slipped from R13.40 to the US dollar in June to its current price pegged at around R16.15.”

Increases in the retail margin and a related bouquet of costs, which are traditionally adjusted for December annually (such as wholesale margins and secondary storage and distribution) were fairly modest, and totalled around an extra 17c/l a litre.

“The increases year on year since December 2020 are astronomical. Petrol has increased by more than 40%, diesel by around 44%, and illuminating paraffin by more than 70%. Wages and salaries have not kept pace with these heavy increases, and consumers will undoubtedly be under more financial pressure because of the knock-on effects on other products,” the AA said.

From January to the latest increase for December announced on Monday, ULP95 petrol has increased by a staggering R5.87/l, while ULP93 petrol has increased by R5.89/l over the same period. Diesel 0.05 has climbed by just under R5.47/l over this period, while diesel 0.005 has increased by R5.50/l. Users of illuminating paraffin are paying R4.83 more in December than they did in January.

“These increases are severe and will undoubtedly have major negative implications on already financially constrained consumers. In the last two months alone, petrol has increased by more than R2/l, diesel by between R2.21/l and R2.23/l, and illuminating paraffin by R1.83/l. These massive increases, we believe, strengthen our call for a review of the fuel price structure, and for a recalculation of all the elements that comprise the fuel price,” concludes the AA.

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