Expected rise in petrol prices worsens situation in South Africa

Written by: Ayman Ragab

Fuel prices in South Africa are experiencing volatility, with gasoline price indices rising again after a period of decline, as the government prepares to end part of the tax exemptions granted on fuel starting next June.

According to data from South Africa’s Central Energy Fund, petrol prices have moved from a low of around 85 cents per liter at the start of the month to increases of between 3 and 8 cents per liter, the first positive improvement after three months of significant rises.

Current estimates indicate that:

Gasoline 93: Up by 8 cents per liter.
Gasoline 95: Increase by 3 cents per liter.
Diesel 0.05%: A decrease of 5.02 Rand per liter.
Diesel 0.005%: A decrease of 4.26 Rand per liter.
Illuminated paraffin: a decrease of 5.21 rand per liter.

Temporary improvement

Despite this improvement, the National Treasury is preparing to reinstate part of the fuel tax that was reduced last April, with an additional 1.50 rand per liter starting in June, and the full tax charge returning in July with the addition of another 1.50 rand.

This is expected to push up petrol prices by more than 1.40 rand per liter next week, despite a relative improvement in the market.

In contrast, diesel users are expected to benefit from significant reductions, with prices estimated to fall by between 2.30 and 3.00 rand per liter, as a result of the large surplus in recovery rates.

Imposing the fuel tax in full at once

Some economists have suggested the possibility of reinstating the entire fuel tax, which amounts to 3.93 rand per liter, at once, but current recovery rates may allow for the absorption of that increase as diesel prices continue to fall.

This coincided with relative stability in global markets, supported by the strength of the South African rand and oil prices moving in a range close to $100 a barrel.