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AA warns of over R1-a-litre petrol price hike in April

In the wake of spiking global oil prices, a weakening rand and fuel levy increases.
The knock-on effects of severe fuel price and levy increases are battering consumers from all sides. Image: Moneyweb

South Africa’s biggest fuel price hike since July last year is expected to come into effect in April, with the Automobile Association (AA) on Monday predicting petrol will increase by R1.16 a litre and diesel by 92 cents a litre.

Read: Petrol at R15 per litre – or R20? (Jan 18)

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The surge in the global Brent crude price to almost $70 a barrel (an almost two-year high) and the weakening rand are largely to blame.

However, 26 cents of the anticipated increase is linked to the annual hike in the General Fuel Levy (GFL) and the Road Accident Fund (RAF) levy announced by Finance Minister Tito Mboweni in the budget in February.

Read:
The winners and losers from surging oil and commodity prices
Oil steady below $70 with dollar rising and mixed demand outlook

The overall spike is expected to drive up inflation, which hit the lower end of the South African Reserve Bank’s (Sarb’s) 3-6% target in recent months in the wake of the Covid-19 pandemic that induced global trade and travel restrictions.

While the increase will hit consumers and business, it is also likely to influence the Sarb to keep interest rates steady for the rest of the year and possibly increase rates sooner.

“These [fuel price] increases will exacerbate the already dire financial positions of millions of South Africans,” the AA said in a statement, following the release of latest unaudited mid-month fuel price data by the Central Energy Fund.

Grim picture

“Steepening climbs in international petroleum prices are being worsened by a dipping rand/US dollar exchange rate, painting a grim picture for local fuel prices.

“The forecasted increases are worrying and could have a severe impact on an economy already reeling from a number of negative factors, including corruption, overspending on the civil service, and the largest contraction in a century,” it said.

“As things stand today, petrol is set for a 90 cents-a-litre rise, diesel for an increase of 66 cents, and illuminating paraffin an increase of 62 cents,” the AA pointed out.

“These expected increases do not include the 26-cents a litre increase to the GFL and RAF levy … which come into effect in April,” it added.

The organisation also noted the one-cent increase to carbon tax.

“Within the current scenario, with the addition of the levies, petrol is expected to increase by a whopping R1.16 a litre and diesel by 92 cents a litre,” said the AA.

“With the expected increases factored in, a litre of 95 ULP Inland [currently at R16.32/l] will now cost R17.48/l of which R6.10 will be taxed through the GFL and RAF. This means that at least 35% of the cost of a litre of this petrol will be taxed.

“The price of diesel [currently pegged at R14.12/l] will increase to R15.04 of which R5.96 [including increased levies] will be taxed – or at least 40% of the total cost,” it added.

And things could get worse …

The AA said that either the rand or international oil prices will require a sharp reversal if the picture is not to deteriorate further by month-end.

“The rampant upward march of international oil prices has quickened alarmingly in the first weeks of March. The basic fuel price for petrol, for instance, shot up from R6.55 a litre at the February close-out, to R7.40 a litre in the first two weeks of March,” it explained.

“Over the same period, the average rand/US dollar exchange rate weakened by about 30 cents.”

The AA warned that the government “can no longer ignore” the knock-on effects of severe fuel price rises.

“The cost is not only direct, but throughout the value chain, and is battering consumers from all sides. It requires urgent review to help ease pressure on consumers who are battling to stay financially afloat,” it said.

Read: Fuel rewards compared as Capitec and Nedbank launch theirs

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Inflation this year will be a min of 15%.

Any money that goes towards the government is TAX, calling it anything else creates a facade of lies…

As part of our Constitution and the finance ministry’s policy specific all money that comes in goes to a central account where it will be distributed. This law was created to address the inequalities of society, but its failed because it worked on “Hope” that the people in charge would do the jobs “Honestly” and for the betterment of society.

That is why no matter what they “Name” the type of tax, at the end of they day it will not be for its intended purpose. Good Example of this is the Environmental Tax on Tyres and the blatant scam that it is…

I am of the view if your going to tax me on something to deter my use the at least give me an alternative option which is equally affordable, like a stable supply of electricity to the same cost of the now “Environmentally Taxed” petrol.

https://www.sars.gov.za/AllDocs/OpsDocs/Policies/SE-EL-11%20-%20Environmental%20Levy%20on%20Tyres%20-%20External%20Policy.pdf
https://www.iol.co.za/business-report/economy/environmental-tyre-levy-to-go-to-sars-2073148

Nothing grim about it. Just ask the reserve bank.

Inflation is well within the target range.

AND

ESKOM keeps using Diesel to generate power.

How thick are these idiots??? They then export the power they generated with diesel to our neighbors at a fraction of the cost???

The people that vote for these …… should not cry. ZIP IT!!

HEY Cyril. WAKE UP MAN!!!

I take comfort in knowing that 35% and 40% of the cost of each litre of petrol and diesel respectively, helps to feed the insatiable hunger of the New Dawn government.

Call it a liberation tax.

GFL and RAF are just examples of how our inept, cash strapped government will only ever try to squeeze as much out of the tax payer as possible.
High oil prices – hoes en betaal.
Low oil prices – hoes en betaal.
These levies consistently outstrip inflation and are around 50% of every litre of fuel sold?
That is laughable and the knock-on effect on the economy and our poorest citizens is tragic.

The great equaliser as everyone has to pay. From the day to day taxi commuter to the upper earners in our society however the poorest of the poor (read voter) will feel it the most.

The poorest of the poor always feel it, especially in this country where the ANC feel nothing for their own poor.

Very true words, let them keep on voting for Zim 2.0

All the more reason to bring on the EVs… although, come to think of it, electricity is going up 15%… so I guess the best option is to just stay home!

End of comments.

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