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Fuel price shocks ahead – AA

Current unaudited data from the Central Energy Fund (CEF) is pointing to massive fuel price increases across the board for June. The Automobile Association (AA) says consumers could face further pressure because government’s earlier relief of reducing the General Fuel Levy (GFL) ends in May, which, when returned to the GFL, will result in price shocks never seen before.

 

“In late March government reduced the GFL by R1.50 for April and May which brought temporary relief to consumers. The big question now is how government plans to deal with rising fuel costs from June onwards, especially given that baseline prices are forecast to move significantly upwards in June. Based on current, unaudited data from the CEF petrol is expected to increase by between R1.93 and R1.97 a litre, diesel is expected to increase by between R1.60 and R1.62 a litre, and illuminating paraffin is expected to climb by a whopping R2.14 a litre,” notes the AA.

 

The Association says it must be noted that these price increases reflect data from the middle of the month, and that the final data may vary between now and when the adjustment is finally made.

 

“The two main factors which influence local fuel prices are the R/US dollar exchange rate and international oil prices. The Rand is currently trading weaker against the dollar and oil prices are also still high. Given this, the outlook for June’s fuel prices does not look positive,” says the AA.

 

The AA says while the outlook locally is negative it must be noted that similar trends are being seen throughout the world and that rising fuel costs are also contributing substantially to the cost of living in other countries.

 

The Association says while government’s relief on the GFL was welcome, a longer-term solution is needed. It says when government announced the relief in March, it also noted other measures proposed by the Minister of Mineral Resources and Energy (DMRE) to be introduced after the expiry of the temporary measures.

 

“We are rapidly nearing the end of May and the fuel outlook is looking bleak. Government needs to address this issue sooner rather than later; consumers are anxious about what lies ahead, and government should allay these concerns by indicating as early as possible what steps it will be taking to mitigate against rising fuel costs,” concludes the AA.