Business Maverick

FUEL HIKE

Petrol price went up today… provoking more criticism of the government

Petrol price went up today… provoking more criticism of the government
(Photo: Gallo Images / OJ Koloti)

The price of petrol is approaching R20 a litre — the highest yet. Consumers have been slapped with at least five price increases so far this year. The government has been criticised for not doing more to shield them from damaging hikes.

South Africans were shelling out about R14.90 a litre in January 2021 to fill up their vehicles with petrol. Ten months later, consumers will have to dig deeper into their pockets as they will pay close to R20 a litre — the highest price yet. 

Petrol price increases are vicious as people who don’t own vehicles are not spared the pain. Such hikes make life generally unaffordable as they lead to higher food prices and travel costs at a time when many are out of work.

There’s evidence that higher petrol prices affect the cost of living because consumer inflation — although benign — is starting to rise. Read more here.

The Department of Mineral Resources and Energy, which adjusts the price of petrol, announced another increase from Wednesday, 3 November 2021. The price has increased about five times so far this year.

The price of both 93 and 95 octane petrol will go up by R1.21 per litre, pushing the cost of filling up a vehicle to more than R19.50 a litre in the economic hub of Gauteng and other inland provinces. Petrol in South Africa is more expensive than in Namibia (motorists pay about R16 per litre) even though the former supplies the latter with petrol.

The price of diesel will go up by R1.48 per litre, the department said, while the wholesale price of illuminating paraffin will rise by R1.45 per litre. 

The latest adjustments have vexed the Automobile Association (AA), a consumer advocacy group that predicted the steep increase as early as October. But the department confirmed the increases on Monday, 1 November at 9.44pm, a few minutes after voting stations officially closed for the local government elections. Curiously, the department’s media statement accompanying the petrol adjustment announcement was dated 28 October 2021, prompting the AA to speculate that the announcement was deliberately held back until the conclusion of voting. 

After all, petrol price increases can arguably make voters angry as they head to the polls. “It is difficult to conclude otherwise than that this bad news [of petrol price increases] was deliberately suppressed to protect the incumbent government,” the AA said. “We will be writing to Parliament to demand an explanation for the delay.”

For the latest petrol price adjustment, the department has proffered the usual excuse: International crude oil prices (the main ingredient for petrol) have increased in recent weeks, coupled with a weak rand, which made crude oil imports more expensive. The additional cost to bring crude oil into South Africa is passed to the consumer. 

Since September 2021, crude oil prices have increased by more than 30%. Global factors have put pressure on the rand as it weakened by 7% against the US dollar over the same period. 

But the AA has long argued that the government can absorb the volatile crude oil prices and choppy movements in the local currency, and not pass the impact on to consumers. Built into the retail price of fuel are taxes, which the government can use to absorb the cost of volatile commodities and shield consumers from further petrol increases. If a litre of petrol costs R19.50, at least R6.11 goes to taxes — nearly R4 in the form of a fuel levy (contributed to the government, which is left to use it as it sees fit), and the balance goes to the financially distressed Road Accident Fund.

The AA has called for greater transparency in how contributions to the fuel levy are used and managed by the government. It also wants the levy to be reviewed and cut because few countries tax petrol to the extent that South Africa does. 

“As we have said many times in the past, all the elements that comprise the fuel levy must be fully interrogated to determine if they are necessary. Given that the fuel prices are now at record highs, such a review is overdue.” DM/BM

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