Grim outlook: Highest fuel price spike set to hit the pumps in September

Rising global oil prices and the rand breaking through the R19/$ level on Monday this week are paving the way for a massive increase at the pumps in September.

If the latest prediction based on a mid-month data snap shot from the Central Energy Fund (CEF) becomes a reality on Wednesday, 6 September, the increases will mark the highest fuel price spike since December last year.

Combined with our crippling cost-of-living crisis, there most likely won’t be any loose change in the cubbyhole for choked-up motorists to wash down the lump in their throat with a pepper steak pie and fizzy drink from the 24-hour shop…

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September fuel price: Expected changes in petrol, diesel and paraffin

Petrol is currently pointing to increases of between R1.41/litre (for 93 unleaded) and R1.45/l (for 95 unleaded), while diesel could climb by as much as R2.60/l and paraffin by R2.55/l.

For 95 unleaded users in Gauteng, the increases will result in a price point of around R24.28/l for fuel, and it will cost about R1335 to fill a 55-litre car. Filling the same car at the coast will cost around R1311.

Impact on other sectors, cash-strapped consumers

The steep hike in the price of all petrol and diesel grades has raised concern from all quarters.

The Automobile Association of South Africa (AA) cautioned that the surge in fuel prices will pile pressure on all diesel users, but particularly large users in the agricultural, retail, manufacturing, as well as retail sectors.

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And of course, it should come as no surprise that consumers will have to face yet another barrage of price increases at the till as the AA stressed that these fuel price costs are recovered through higher prices.

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Crucial fuel price factors: Rand/dollar, oil prices

The fuel price in South Africa are driven by two main factors:

• Global oil prices; and
• The rand/dollar exchange rate. This because crude oil is traded in US dollars. A weaker rand means fuel becomes more expensive to buy.

Economists at Nedbank noted on Monday, 14 August that the rand’s weakness mainly reflects the impact of a stronger US dollar, although local factors are also at play, as per BusinessTech.

Domestically, the recent violent and disruptive taxi strike in Cape Town hurt sentiment, while the country’s disappearing trade surplus added further to the downside.

At the time of writing, on 17 August, the international price of Brent Crude oil was listed at $86, while the rand was trading at R19 to the US dollar.

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Who has the last say on fuel price?

The Department of Mineral Resources and Energy (DMRE) has previously stressed that the daily CEF snapshots are not predictive and do not cover other potential changes like slate levy adjustments or retail margin changes which could come into play when the fuel price is determined on Monday, 4 September.

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

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