Petrol price

While it is still too early to predict what lies ahead for diesel and petrol prices in February, the latest data shows encouraging signs. Image: Adobe Stock

No April fuel joke! Petrol, diesel, paraffin prices expected to rocket – again

Fuel price shock? Mid-month data points to steep fuel price increases in April.

Petrol price

While it is still too early to predict what lies ahead for diesel and petrol prices in February, the latest data shows encouraging signs. Image: Adobe Stock

Early indications, based on mid-month data from the Central Energy Fund (CEF), show that motorists and South Africa’s battered economy are expected to take yet another hefty knock at the fuel pumps in April.

Following significant increase in the prices of petrol, diesel and illuminating paraffin since the beginning of 2021, consumers may have to brace themselves for an increase of up to 90c per litre for petrol and 66c for the equivalent amount of diesel.

‘Under-recovery across the board’

This is according to BusinessTech, which on Monday 15 March 2021 reported that the latest CEF data points an “under-recovery across the board” — which is likely then to translate a sharp price increase at the pumps.

While fuel prices are largely determined by the rand/dollar exchange rate and international oil prices, national government’s inclusion of levies in the overall price also weigh heavily on the retail costs for consumers. Increases in two levies built into the fuel prices are expected to take effect in April, meaning an increase in costs regardless of other contributing factors.

What is the expected fuel price increases for April?

Based on inland pricing:

  • Petrol 95: increase of 90 cents per litre;
  • Petrol 93: increase of 87 cents per litre;
  • Diesel 0.05%: increase of 66 cents per litre;
  • Diesel 0.005%: increase of 65 cents per litre;
  • Illuminating paraffin: increase of 62 cents per litre.

This is how the expected prices would reflect:

Fuel (Inland)March officialApril expected
95 PetrolR16.32R17.48
93 PetrolR16.15R17.28
0.05% Diesel (wholesale)R14.12R15.04
0.005% Diesel (wholesale)R14.16R15.07
Illuminating ParaffinR8.45R9.33

With the mid-month numbers viewed as an indicator or “snapshot” for pricing next month, BusinessTech said the Department of Energy would makes adjustments (to the pricing) based on a review of the full period – while noting the outlook could see significant changes before month-end.

The mid-month data however provides solid indications on the trend and likely prices at pumps.

What the mid-month data says

At mid-March, the ZAR/USD exchange rate is contributing to an under-recovery of around 16 cents per litre – however, rising international product prices are contributing to an under-recovery of around 73 and 48 cents per litre to the under-recovery for petrol and diesel, respectively, causing the deficit.

At mid-March, the ZAR/USD exchange rate is contributing to an under-recovery of around 16 cents per litre – however, rising international product prices are contributing to an under-recovery of around 73 and 48 cents per litre to the under-recovery for petrol and diesel, respectively, causing the deficit.

Exchange rate

The rand remained relatively stabile in the first two weeks of March, but on average, however, the rand/dollar exchange rate has trended slightly higher than in February, within a narrow range of around R15.00 to the dollar.

While the rand is being supported by high commodity prices, economists note that interest rates in the US are having a much bigger impact on local markets.

Specifically, a rise in rates in the US has pushed investor sentiment out of risk markets like South Africa, resulting in outflows, and putting pressure on the local currency.

This pressure is expected to be sustained for the second quarter of the year, while commodities could fall out of favour, which would put the rand under additional pressure.

The 2021 Budget Speech had little effect on the rand, with analysts noting that much of the economic turmoil and budget tightening has been priced into the currency for a while. Load shedding, and student protests – which threaten business operations, have been noted as short-term concerns.

International product prices

The price of international products used in the refinement of petroleum have been sustained at elevated levels, following a sharp spike at the end of February.

These prices are mainly affected by the international oil price, which has climbed steadily since the start of the year.

Crude has rallied strongly in the opening months of 2021, supported by the vaccine-aided recovery from the pandemic and the decision by the Organisation of Petroleum Exporting Countries (OPEC) and its allies to keep a tight rein on supplies.

Prices have long shot past the lows experienced in 2020 as a result of hard lockdowns in high production countries in response to the COVID-19 pandemic.

Fuel price taxes

April will also see tax changes around the fuel price come into effect.

In National Treasury’s 2021 budget, it was announced that motorists will pay an inflation-related increase of 15 cents/litre in the general fuel levy and a higher-than-inflation increase of 11 cents/litre in the Road Accident Fund levy.

This will add a combined 26 cents per litre to fuel prices from April, which would push increases to over R1.00 for petrol.