MOTORISTS are once again preparing to experience increased financial demands at the petrol pumps, as both petrol and diesel prices are slated to increase on May 6. This adjustment followed a recent announcement issued by the Department of Mineral and Petroleum Resources.

Also read: Rising fuel cost: How the basic fuel price is calculated

According to the department’s figures, the price of petrol, encompassing both 93 and 95 ULP and LRP grades, would increase by R3.27 per litre. Diesel, across its various grades, faced an even steeper climb, with an additional R6.19 per litre. 

Leading cause

The primary driver behind these rising costs, as identified by the department, stemmed from an upward trend in global oil prices. This surge was largely a consequence of ongoing geopolitical tensions, particularly those unfolding between the US and Iran. Disruptions within vital shipping arteries, such as the Strait of Hormuz, placed considerable stress on the global supply of crude oil, which, in turn, escalated its per-barrel cost.

During the period under review, observations indicated that the average price for Brent crude oil had ascended from $93.67 to $101 per barrel. Furthermore, the prices of refined international petroleum products mirrored this general upward trajectory. Diesel and paraffin’s accelerated growth was linked to heightened demand coupled with constraints in supply within the Persian Gulf region.

Domestically, the rand’s exchange rate against the US dollar showed a degree of stability, moving only marginally from R16.64 to R16.65. This steadiness, however, offered little in the way of mitigation, as the predominant inflationary pressure originated from the global oil markets rather than local currency fluctuations.

Additional influencing factors

An additional factor influencing the price adjustment involved the implementation of the Slate Levy. This mechanism was designed to recuperate cumulative under-recoveries in the national fuel pricing structure. By the end of March, the slate balance had accumulated a deficit of R14.173b, thereby necessitating a levy of 122.70 cents per litre.

In an effort to alleviate the burden on consumers, the government had, however, introduced a temporary relief measure. This involved a reduction in the general fuel levy, with petrol seeing a decrease of 300 cents per litre and diesel 393 cents per litre. This measure is scheduled to take effect from May 6 to June 2.

The pronounced increase in diesel prices, given its widespread use across the transport, agricultural, and logistics sectors, was anticipated to ripple throughout the economy. Such a rise could potentially elevate the costs associated with a broad range of goods and services.

Potentially not the last increase

With the persistence of global conflicts and uncertainties, analysts offered a cautionary perspective, suggesting that fuel prices might remain volatile in the forthcoming months.

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