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Motorists could see 8th fuel hike as tensions rise in Saudi Arabia

Oct 16 2018 12:37
Tehillah Niselow, Fin24

The Automobile Association has warned of an eighth consecutive fuel price increase at the end of October, saying petrol could increase by 40 cents per litre, diesel by 70c/l and illuminating paraffin by 65c/l.

The association, commenting on the unaudited mid-month data from the Central Energy Fund, noted that international oil prices “remain stubbornly high” while the current tensions involving Saudi Arabia, the US and the suspected murder of Saudi journalist, Jamal Khashoggi, could have an impact on fuel prices as the kingdom is one of the world's largest oil producers.

Firm rand

However, the recent firming of the rand, amid a weaker US dollar and signs of the stabilisation of National Treasury under newly appointed Minister of Finance Tito Mboweni “has taken some of the bite out of oil’s rally”, the association says.

Motorists and consumers have been reeling from eight consecutive fuel hikes this year, amid a stronger international Brent Crude oil price, a weaker rand and an increase to the government’s fuel levy in April.  March was the last time that the Department of Energy announced a petrol price decrease.

Fuel retailers were asked to absorb a hike in September but government only lifted the price by 5c/l for petrol and largely cushioned the blow. 

Capping unleaded prices

The department is currently working on a proposal to set a maximum price for the sale of 93 octane ULP and LRP fuels

The AA said that if this were to be implemented, it will allow fuel retailers to determine their own prices, below the maximum amounts indicated by government.

“The proposal looks to be consumer-friendly, and that detail will clarify how this will work once all the feedback is received,” the AA said in a statement on Monday.

The association warned that yet another petrol price hike will have severe economic knock-on effects and said that a stronger and more stable rand is the country’s “only defence” against the volatility of the international oil price.

Public transport

Public transport analyst Paul Browning told Fin24 that minibus taxis are one of the big users of 93 octane petrol and should government decide to cap the price, it might have some effect in reducing taxi fares.

He also noted that there is a lack of capacity in implementing government policies around public transport and most private car users will “likely have to bite the bullet” and continue to use their vehicles as the public transport system does not provide a coordinated and integrated alternative.

The Department of Energy was not available for comment. News24 reported previously that Thursday was the deadline for proposals on the possibility of a capped unleaded fuel price. Brent Crude oil was trading 79.88 $/barrel at 11:47 on Tuesday.

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