Petrol price on the up, but diesel set to cost less

Petrol price on the up, but diesel set to cost less

Trade union federation Cosatu has called on the government to ramp up efforts to soften the blow of the increasing petrol price, as they said workers could not afford price hikes which deplete their meagre wages and impact the cost of food.

This comes as the AA, commenting on unaudited data from the Central Energy Fund (CEF), anticipated the price of unleaded 93 petrol to increase by 37c per litre in May, pushing the price close to R25.15/l, and unleaded 95 inland by 38c/l, pushing the price to around R25.50/l.

Diesel is set to decrease by 35c/l, while illuminating paraffin is set to drop by 28c/l.

“The decrease in 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,” the AA said.

Bureau for Economic Research (BER) economist Tracey-Lee Solomon said this was the highest petrol price since October 2023, which was “close to a record high”.

“Current high prices result from high oil prices and a weak rand. Since the start of the year, the Brent crude oil price has risen over 15%. In addition, so far in April, the Brent crude oil price has averaged almost 6% above the average price in March.

“On the currency front, the rand is little changed (on average) when comparing April to March. Fuel price movements are set according to the previous month’s fuel product price and exchange rate movements.

“On balance, this means that Brent crude oil is more expensive in rand terms. However, the expected increase in petrol prices is larger than in the Brent crude oil price. This is because refined fuel product prices have been increasing faster. Refinery outages in Russia, unplanned outages in Europe and tepid activity in China have put pressure on the supply of refined products and lifted prices.”

Solomon said prices could decrease in the coming months as the current oil price included a “sizeable Middle East risk premium”.

“Should tensions in the region ease, the oil price should decline. However, as noted, refined product prices are the problem, and global refinery runs will need to increase to see a significant decrease in fuel prices.”

Solomon anticipated higher petrol prices would put further pressure on the consumer and could also crowd out spending on other goods.

“On the flip side, the lower diesel price has a positive impact on businesses that are reliant on fuel. However, this impact is less pronounced for businesses that use diesel during load shedding when power cuts are not as frequent (like we are currently experiencing).

“A further concern relates to the duration of the current oil/petrol price spike. If prices remain high or, worse, continue to increase, this will put pressure on headline inflation. This is a global concern, especially as many central banks are expected to lower policy rates later this year,” Solomon said.

Cosatu parliamentary co-ordinator Matthew Parks said they were concerned about the pending increase in fuel prices, especially in terms of its potential impact on inflation.

“Workers cannot afford these fuel price hikes as it depletes their meagre wages and has a heavy impact of food, electricity and transport costs which hit workers hardest.

“There’s little South Africa can do about the international oil price but we believe government should review the fuel price regime to see if taxes on fuel price can be reduced. Similarly the Road Accident Fund needs to be placed under administration to lessen its dependence on fuel levy hikes,” said Parks.

He added that buffers to rising costs could include more support given to Eskom “to end its addiction to double-digit tariff hikes”.

“Similar support for Transnet and Metrorail must be ramped up to protect food and commuters from fuel price hikes,” Parks said.

Cape Times