South Africans are bracing for a significant impact as the fuel-price hikes in April have reached unprecedented levels, with diesel prices nearing R9 per litre. The latest data from the Central Energy Fund (CEF) shows an underrecovery of R8.52 per litre for wholesale diesel with 0.05% sulphur, and R8.63 per litre for 0.005% sulphur.
The fuel levies are also increasing by 21c per litre on 1 April, which would mean an increase of R5.41 per litre in the petrol price, and up to R8.84 per litre in the diesel price. This would take diesel prices to record levels, according to the Department of Mineral Resources and Energy.
Diesel Price Increase Impact
The expected increases will have a direct hit on fuel stations on 1 April, but the aftershocks to the economy will probably push prices higher across the board as production and transport costs increase. This could potentially set off a vicious cycle of higher inflation and even higher interest rates, as highlighted by Investec chief economist Annabel Bishop.
Petroleum-Based Inputs Affected
Petroleum-based inputs are used in a wide range of products, including fertilisers and other agri-chemicals, plastics, synthetic rubber and automotive parts, paints, detergents, pharmaceuticals, synthetic fibres such as polyester, industrial chemicals, solvents, gases and other petrochemicals. These will also be impacted by the diesel price hike.
Some of the key products that will be affected include:
- Fertilisers and agri-chemicals
- Plastics and synthetic rubber
- Automotive parts and paints
- Pharmaceuticals and industrial chemicals
According to Duncan Pieterse, deputy-general of the National Treasury, the government has very little leeway to soften the blow. Suspending the increase in the levy would be temporary and, in any case, be of very little real help compared to the huge underrecoveries.
Paraffin, which is not subject to any levies, would have to increase by a massive R10.58 per litre if prices had to change today. There is still one week left during which the situation could improve – provided that the rand pulls back from recent lows, and the oil prices stabilise or fall a bit, as seen on the Investopedia website.
