Really Bad News for the Price of Petrol in South Africa

Sourced from the South African

The Automobile Association (AA) of South Africa has warned motorists to expect a “fuel price hike of catastrophic proportions” in November.

According to a bi-monthly price outlook, the AA’s most recent interpretations of current exchange rates and commodities pricing data point to massive increases in the price of fuel which is expected to reach motorists as November begins.

It says that if the situation continues, South African motorists could be paying up to R20 per litre of petrol by the end of the year.

“The current picture is showing petrol up by 99 cents a litre, and diesel and illuminating paraffin higher by a whopping R1.42 a litre. This will push 95 Unleaded inland above R19 per litre (close to R19.30 per litre), and R17 per litre for diesel,” the AA said.

“Taking this potential increase into account, the price of a litre of fuel inland (95 Unleaded) will have increased from R14.86 per litre in January to R19.30 per litre in November – a 30% increase over 11 months.”

The AA added that the expected price hike of diesel and illuminating paraffin could be “the largest in South African history.” Though it made it clear that predictions were based on data gathered for half a month, and that the rest of October could see events that change these expectations.

Current projections are based on the price of Brent Crude oil which is seeing a massive surge in demand and has broken through the $85 per barrel mark. Demand for the commodity has been increasing rapidly for the last several months as more and more countries exit lockdown conditions with vaccines becoming more and more pervasive.

The price of Brent Crude has also stirred the US government, with the AA saying in a statement: “We note the concern this is generating in the USA, where President [Joe] Biden was reported to have called on the OPEC+ cartel to increase oil output to stabilise prices. This has not generated a response from OPEC+, and our view is that a response is not likely, since the current price pressures are beneficial to the cartel’s members,” reinforcing the fact that price expectations are probably not going to change too much unless drastic actions are taken.

Another factor that is influencing the high projections is the rand to the dollar exchange rate. ZAR is currently at R14,78 to the dollar. With this, the AA adds that South African motorists are “paying at the pumps for weak governance.”


By Luis Monzon
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