MAINTAIN CUSHION ON FUEL - ANALYST

MBABANE – “Government should find alternative ways in which it can stabilise the economy so as to avoid another fuel hike.”

This was said by Financial Analyst Thembinkosi Dube in an interview with this publication, after South African economists predicted a fuel increase next month. This is due to the soaring global oil prices as South African motorists are set to see a slight relief in May after the rand weakened. Data from the South African Central Energy Fund on Monday showed an over-recovery (decrease) of 24 cents per litre for 95 petrol and 22 cents per litre for 93 petrol. By comparison, the cost of diesel is expected to increase in the neighbouring country by between E0.80 and E0.86 cents per litre.  Locally, the Ministry of Natural Resources effected a fuel price increase earlier this month (April 8). Petrol prices increased by E0.50 cents per litre while diesel and paraffin increased by E1 per litre.

The price increase was mainly due to the crude oil price increase, which at the time reached an average of US$118.82 (E1 892.54) per barrel in March, 2022 from an average of US$92.82 (E1 478.42) in February. Given that the country heavily relies on South Africa for its fuel imports, this could also essentially affect the country’s fuel prices negatively. However, Dube mentioned that government would have to look at alternative ways at which they can cushion the forecasted fuel increase.

Businesses

He also said: “I think government is also concerned with the rise in petrol prices as it makes it difficult for businesses to function properly. There needs to be ways in which government can stabilise the economy, but I do not see us reaching over E22 per litre.” While these costs will be further offset by the government’s announced fuel price intervention, motorists hoping for a substantial drop after months of increases are in for a disappointment due to the rand’s softening stance. It is worth noting that the international oil market situation of very high crude oil prices necessitated the higher fuel increases locally of E2.20 per litre for petrol, E3.50 for diesel and E3.50 for paraffin. Government provided funds amounting to E80 million to cushion the price increases, and this allowed for a reduction in the impact to consumers and also protecting the economy too. However, with the rise in global oil prices amid the ongoing Russia/Ukraine war, it is yet to be established how long this cushion will be for.

According to businessinsider.com, at the end of March, SA’s finance minister Enoch Godongwana said the government would temporarily reduce the general fuel levy (GFL) included in the Basic Fuel Price by E1.50 per litre between April 6 to 31 May 2022. The Department of Mineral Resources and Energy is scheduled to publish the official petrol price on or before May 4, 2022. Meanwhile, oil shed some of its value, as it fell to US$103 (E1 553.949) per barrel, while gold also lost some of its appeal against the dollar, to trade at US$1,902 (E30 293,17)  per fine ounce.

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