Dramatic hike in fuel prices: ‘Consumers at the mercy’


The increase in fuel prices that comes into effect on Wednesday shines a new spotlight on the extent to which South African consumers are at the mercy of matters over which they have no control, such as the value of the rand and the price of oil.

“Only sustained economic growth will be able to reverse the long-term trend of more expensive fuel,” says Wynand Boshoff, the FF Plus’ chief spokesperson on energy.

RNews earlier reported that the central energy fund announced on Monday that diesel of 0.05 sulfate and 0.005 sulfate will increase by an astronomical R2.84 and R2.76 per liter respectively. Both grades of petrol (93 and 95) will rise by R1.71 per liter on 6 September. Paraffin increases by R2.78 per liter and gas by R2.26 per liter.

“The oil price is subject to external factors. The value of the rand, on the other hand, is largely influenced by currency traders’ perception of the country’s economy,” adds Boshoff.

Oil, the price of which is fixed in US dollars, is purchased with rands. The less the rand is worth, the more expensive fuel is in South Africa.

“Only when confidence in South Africa’s economic and political stability is restored will the value of the rand recover on a sustained basis. This will contribute to cheaper fuel, lower inflation and consequently stronger economic growth.”

The South African Reserve Bank last week made a number of proposals to tame runaway fuel prices. This is particularly about the assumptions according to which profit margins and a basic price of refined fuel types are determined.

“Although pricing needs to be constantly reassessed, the difference it can make is far overshadowed by fluctuations in the exchange rate and the price of Brent crude oil. Ultimately, the fuel price, like the rest of the South African economy, deserves better than an ANC government.”