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Fuel increases will hit consumers hard – AA

The Automobile Association (AA) says the fuel price adjustments announced by the government today will hit already financially stretched pressed consumers hard and put extra pressure on an already struggling economy.

The adjustments announced by the Department of Mineral Resources and Energy (DMRE) today include an increase of R2,57 to 95ULP petrol in Gauteng will push the cost of this fuel to R26.74, while the increase of R2,37 to 93ULP will push this fuel price to R26.31, all new record high prices. The price of diesel will increase by R2.30, and the wholesale price of illuminating paraffin will increase by R1.66. In both cases, these increases will also push the prices of these fuels to new record highs.

According to the data, the movement in international petroleum prices is the main driver behind the increases. The value of the Rand appreciated on average against the US dollar in June resulting in a saving of around 20c/l to the increases, without which the basic increases would be higher.

A major factor in the increase of the international petroleum prices remains the ongoing conflict in the Ukraine which is contributing to supply and demand pressures. As long as this conflict is unresolved, the increases to fuel prices – both in South Africa and other countries – remains likely.

“In addition to the increases to the basic fuel prices, the R1.50 relief off the General Fuel Levy (GFL) given by the government for May and June, was halved for July which adds to the increases. This means the increase of R1.82 to 95ULP is, effectively, an increase of R2.57. This, and other increases announced today, will certainly negatively impact on all South Africans and will, undoubtedly, play a big role in the economy going forward,” notes the Association.

The Association says while pressure is building on the government to formulate a solution to the rising fuel costs, short-term relief, while welcome, is not sustainable.

“We understand that government has little leeway in terms of international petroleum prices and the Rand/US dollar exchange rate, which is why we have called, and will continue to press, for a review of the fuel price, an area where the government has control over the fuel price. There is a need to interrogate all the components of the fuel price, to determine whether all these components are still necessary in the existing formula, and to establish if the current calculations of these components are correct. The longer this review is not initiated, the longer the country will wait for lasting solutions,” notes the Association.