Ukraine-Russia tensions could see petrol price hike

The rising tension between Russia and Ukraine could see already high oil and natural gas prices rise further around the world, with South Africa reaching record highs of more than R20 per litre of petrol despite a decrease in fuel prices in January.

According to political economy analyst Piet Croucamp, while oil and gas prices have been marching upward for months this particular increase would not be because of the rand, but generally due to the instability which could potentially spill over into markets.

“The rand is relatively stable, which means it’s not leading to the petrol price increase. This time, it’s the stability of the markets that will determine the higher oil price per barrel which will impact our price of petrol in SA,” he said.

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Croucamp said although Russian oil might not necessarily lead to a shortage of oil world wide, the fact that there might be sanctions against Russia would destabilise markets, due to the feasible speculation.

“In other words, there’s a likeliness of markets being affected. The first thing of course is that Russia is an oil producer and generally if there is an instability in the world, and that kind of instability will spill over into the markets.”

Political analyst Dr Dale McKinley said a couple of aspects that could affect a price increase were, as the international price accrued, the follow-on costs such as imports and exports and government taxes.

“Unfortunately, when we have a situation like this where we’re fundamentally dependant on imported fuel and oil, we are likely to have a literal effect across the whole economy,” McKinley said.

He said the tension might not only see an increase in fuel prices, but food, transport across the board, as Russia was a large oil producer, which could affect an entire region, looking at the way global fuel prices worked.

The Automobile Association (AA) urged the government to review fuel taxes as any adjustments announced by the finance minister in the budget speech on 23 February would affect financially constrained motorists.

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“Government must act quickly to deal more effectively with the fuel price to mitigate against rising costs that negatively impact all consumers in the country,” AA spokesperson Layton Beard said.

“Our economy is closely linked to the fuel price; it is a major input cost in the manufacturing, retailing and agricultural sectors. “We have noted before that a review of the current structure of the fuel price and an audit of all the elements that comprise the fuel price should be done sooner, rather than later.”

The AA has created a petition which called on the minister to #ReviewTheFuel in his budget speech next Wednesday, which will be submitted along with a letter expressing its views on the levies, while highlighting that any tax increases will be viewed in the context of current spending, corruption and increases to living costs, all at a time when more people than ever were unemployed in the country.

“We must accept that drastic intervention is needed if we are to grow our economy; one way we believe this can be done is by dealing more effectively with the fuel price than what we currently are,” Beard added.