Tag: petrol price hike

By Patsy Beangstrom for IOL

Residents can brace themselves for one of the highest fuel price increases as the cost of petrol smashes the R17 a litre mark from Wednesday.

Minister of Energy Jeff Radebe announced the adjustment of fuel prices for October on Monday.

Both grades of petrol, 93 and 95 (ULP & LRP), will increase by 99 cents and 100 cents a litre (c/* ) respectively from midnight on Tuesday night. This brings the overall retail price of 95 ULP for inland motorists to R17.08 c/* and R16.49 c/* at the coast.

The cost of diesel will go up by R1.24 a litre and illuminating paraffin (wholesale) by R1.04 cents a litre, while illuminating paraffin (SMNRP) will jump by R1.39 per litre. The maximum retail price of LP gas will increase by R1.79 per kilogramme.

The Department of Energy (DoE) said in a statement on Monday that South Africa’s fuel prices were adjusted on a monthly basis, informed by international and local factors.

“International factors include the fact that South Africa imports both crude oil and finished products at a price set at the international level, including importation costs, eg shipping costs.”

The department attributed the main reasons for the latest fuel price adjustments to the rand/US dollar exchange rate.

“The rand depreciated, on average, against the US dollar (from 13.90 to 14.90 rand per USD) during the period under review. This led to a higher contribution to the Basic Fuel Prices (BFP) on petrol by about 50.00c/* and diesel and illuminating paraffin by about 52.00c/* .”

A further contributing was the increase in the price of crude oil which went up from 74.25 USD to 78.25 USD per barrel.

“The main contributing factors were the unwillingness by the Organisation of Petroleum Exporting Countries (Opec) to increase their production outputs and negative impact of the hurricanes on petroleum infrastructure in the USA during the period under review. Furthermore, the looming sanctions against Iran oil exports by the USA will put more pressure on the crude oil prices.”

The Automobile Association (AA) on Friday warned that fuel users are facing unprecedented price increases in October that it described as “catastrophic” for road users.

The AA noted that the major culprit is the country’s economic policy which has left South Africans defenceless against upticks in international oil prices.

In September the DoE decided to intervene temporarily to provide some relief against fuel price hikes.

FNB Agric Business warned on Monday that the increase would place a further strain on consumers and hurt consumption growth.

“The South African Reserve Bank (Sarb) earlier indicated that household consumption has already fallen by 1.3% in the second quarter of 2018 as spending on goods declined, particularly durables which were down 11.2%,” Dawie Maree, head of marketing and information at FNB Agric Business, said yesterday.

“Small business and the poorer households will bear the brunt as their transport costs account for a large portion of household expenditure and the consequence of sustained fuel price increases will further erode disposable income and cause financial stress. This will force a change in spending patterns with a cut in spending on luxury items and frequency of visits to eateries.”

Maree stated that locals faced a dim festive season if the current pace of fuel price increases was sustained in the two months ahead.

“At producer level, the impact will be cost pressures as we head into the new planting season for summer crops. The higher crude oil price, which has now breached the US$80/barrel level, is a double whammy due to the direct influence on the fuel price and the indirect influence on oil derivatives such as fertiliser, pesticides and herbicides (agrochemicals) all of which are inputs in crop farming. This will squeeze profit margins if agriculture commodity prices do keep up with the pace of input cost increases.”

SA faces ‘biggest ever’ fuel hike in October

By Tom Head for The South African

You might have heard a few horror stories about the petrol price in South Africa soaring by R1 for next month. Well, we’re here to tell you it all seems completely true.

The AA forecast a rise of R1.12 per litre of petrol, and a whopping increase of R1.38 for diesel in October – a devastating blow that has been described as “the biggest single hike” in our country’s history. But what’s fuelling this crisis, and why are costs spiralling so dramatically? We’ve got answers.

Oil prices are nearing $100 a barrel
There’s a very bleak outlook for oil prices on a global scale. This is by no means a consolation, but it goes some way to explaining why it’s getting ridiculous in South Africa. It’s not just internal factors that have ramped up the petrol price. Some commentators believe oil prices will hit a 10-year high of $100 a barrel soon.

Tension between the US and Iran
It’s hard to accept, but the world tends to revolve around America at this point. While President Trump is taking a more hostile approach to foreign policy, Iran has become one of his targets. Now, the country is one of the biggest exporters of oil in the world, but there’s trouble on the horizon.

The US government are set to impose further sanctions on Iran while pulling out of an agreement regarding a nuclear deal achieved by the Obama Administration. Production is already dropping in the Middle-Eastern country, and further financial turmoil will have a negative effect on oil costs.

Countries not producing the goods
Energy Minister Jeff Radebe has highlighted that Libya produced 1.5 million barrels of oil a day before the regime collapsed in 2011. That number is now almost at a third of what it used to be.

Venezuela’s current crisis also got a mention. They are a member of the Organization for Petroleum Exporting Countries (OPEC), but the oil industry has all but collapsed in the South American state. To put it in laymen’s terms, production is down and the cost has gone up.

A weak rand value to the dollar
It’s been a nightmare month for the rand, which has had to battle against the fierce knockout blow delivered by the recession. With the financial crisis coming as something of a surprise, the rand plummeted against the greenback and has struggled to find its feet ever since.

It soared above the R15 mark, and only recently came back down to R14.40. Most recently, Turkey’s currency tanked as a result of Trump’s intense import tariffs, aimed at stimulating industrial growth within the US.

In a global market, for every action, there is a reaction, and all emerging economies felt the knock-on effect of Turkey’s wobble.

Government subsidy backfires
Have you ever tried to help a situation but only gone and made things worse? Well, that’s effectively what happened to Jeff Radebe last month. The minister announced that the government would subsidise fuel costs for the month of September, meaning that an increase in the petrol price was smaller than forecast.

However, what were we just saying about actions and reactions? The slight relief felt this month will be compounded by the misery said to be coming our way next week.

For petrol prices to rise by a rand within a 30-day period is sharp, shocking rise. Had there been no government intervention, there’d be less of a knock-on effect. October’s rise could have been as “little” as 50 cents per litre, had South Africans been allowed to pay the full whack in September.

Week after week, there is always a petrol price hike threat to consumers in South Africa. Over a period of 10 years, the petrol price has fluctuated, increasing by a whopping 66% from R9,66 to R16,08. In the last 8 months of 2018, the price has increased from R14,42 to R16,08 inland.

The price hikes in 2018 alone placed a strain on the consumers and prompted the public outcry that led to the subsequent intervention by the government. The Department of Energy intervened after the Automobile Association (AA) of South Africa anticipated a drastic 23c to 25c per litre fuel price increase for the 5th of September 2018. The intervention led to the fuel price only increasing by 4.5c per litre.

According to Central Energy Fund calculations, local consumers could be hit by another bombshell as early indicators are that the fuel price could rise by R1.14 a litre in October. Making matters worse is the shock of the recession and the threat of downgrades by rating agencies.

OLX believes this directly affect more than three thirds of their users. “While OLX prides itself for making it super easy to buy and sell almost anything, our main source of traffic is price-conscious car buyers,” says Diana Mjojo, Communications Manager at OLX South Africa. “With the fuel prices going up again, this is a trend we don’t see coming to an end any time soon and we’re concerned about how it affects our users.”

9 out of the top 10 search terms for 2018 on the OLX platform are for the Cars & Bakkies category. According to the company, the OLX car buyer is financially savvy. They are willing to accept higher mileage vehicles if it means the price of the vehicle is lower.

Mjojo says OLX users are willing to save as much money as possible during these economically hard times. “Users will often pick the practical option over luxury, which may include older models, if it means the vehicles are cheaper. Not only are they conscious about the price of the vehicle but about the petrol consumption as well,” says Mjojo.

OLX advises consumers who aren’t already buying their cars on the platform to consider doing so as that is a smart way to save and set yourself economically free. “Whether you are looking for your first car, need a car to match your muscles or upgrading, OLX is a central place for you. We work with car dealerships that list their approved cars on the platform,” adds Mjojo.

Petrol price triples in a decade

By James de Villiers for Business Insider SA 

The price of a litre of petrol in South Africa increased from R6.92 in July 2008 to R15.53 in July 2018 at the coast, and from R7.16 to R16.02 inland – nearly tripling in the last decade.


Infographic: Fin24

Over the same period, the tax (or fuel levy) on a litre of petrol increased from a low of R1.27 in July 2008 to R3.37 in July 2018.

This means the tax on fuel increased by 165.35% in 10 years.

On Sunday, the department of energy announced that a litre of unleaded petrol will increase by 26c, pushing the price of a litre past R16 in the inland for the first time.

Energy Minister Jeff Radebe ascribed the increasing petrol price to the rand’s poor performance to the US dollar.

Radebe said the increase would have been 20c more if it wasn’t for declining oil prices.

Who has our petrol?

Cash-strapped consumers face another hefty petrol hike as The Department of Energy announced on Monday that a litre of 95 octane petrol will cost R14.01 inland and R13.52 at the coast from Wednesday.

And if that is not enough, the Central Energy Fund board chairperson has said that the fund is still busy calculating how much SA lost when 10.3 million barrels from its strategic fuel reserve were sold off in 2015.

The Central Energy Fund (CEF) can not yet say what price SA paid for the controversial sale of 10.3 million barrels of the country’s strategic oil reserves, or who now owns the stock, according to the chairperson of its board Luvo Makasi.

The secret sale by the Strategic Fuel Fund (SFF) – which is a subsidiary of the CEF – took place in December 2015, at a time when oil prices were at a historical low point.

Speaking to Power98.7 radio host Onkgopotse JJ Tabane on Monday evening, Makasi said that the CEF was still investigating the sale.

Bloomberg reported last month that law firm Allen & Overy led an investigation into the sale, which included a recommendation that a financial analysis of the sale be conducted.

But the fact that the analysis was completed by embattled auditor KPMG SA has caused delays in making the report public.

READ: Energy Minister wants assurance on KPMG analysis of oil sale
Minister of Finance Malusi Gigaba last month advised all government departments and entities to review all work done by KPMG to ensure their audit processes had not been compromised.

First rotation, then sale

In March 2016, three months after the sale took place, then-energy minister Tina Joemat-Pettersson claimed in her annual budget vote speech that the fuel had not been sold, but rotated.

“In 2015, we issued a ministerial directive for the rotation of strategic stocks by the Strategic Fuel Fund and this has resulted in the increased revenue base for SFF, whilst at the same time maintaining stocks within our storage tanks for security of supply,” she said at the time.

READ: AG to probe R5bn ‘secret’ oil deal
But earlier this year new Minister of Energy Mmamoloko Kubayi admitted the strategic fuel stock had in fact been sold off.

During Monday’s interview, Makasi also acknowledged the stock had been sold and not rotated.

But he said the CEF board was only involved in the transaction “at the end”, adding the board only got wind of the sale when a “a good amount landed in our (bank) account”.

A loss

Makasi acknowledged the fuel had been sold in a “depressed market” at a time when international fuel prices were low.

“If you look at where the market was at the time the product was sold, you would then have to make an assumption that there would have been a loss.

“But what we are busy with now, is we are trying to quantify what was the actual loss to the state,” he said.

He promised the CEF would “come back to the public” with the full details of what the loss amounted to.

Asked if anyone would be held responsible for the secret sale – which took place without the knowledge of National Treasury – Makasi reiterated that the scale of the losses first had to be established.

READ: MPs demand answers on ‘illegal’ fuel stock sale
“Where there is a loss, the Public Finance Management Act puts a positive implication on the board of CEF and all its subsidiaries to investigate those instances,” he said.

“So there will be consequences. And when those losses are established, there will be consequences on all those involved in the process.”

Makasi appeared to imply that the CEF was also still investigating who bought the oil.

“The stock never left our tanks,” he said. “But the question of ownership therefore, that is what we are busy now debating.

“There was an element of sensation around. (But) was there cause for concern? Yes there was.”

By Jan Cronje for Fin24

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