Fuel price set to rise as economy gears up for Level 3 - AA

The fall in the petrol price of recent months is set to come to an end in June, according to the latest projections released by the Automobile Association on Friday.

The Association said in a statement that petrol is expected to increase by up to R1.18 a litre. The association also expects an increase of 22 cents for diesel and 41 cents for illuminating paraffin.

Remarking on unaudited month-end fuel price data released by the Central Energy Fund, the AA noted a stronger than expected economic recovery for South Africa as the main reason for their projection and warned that there could be a shortage of diesel as demand from industries starting up again after the Level 4 lowdown shifts to level 3 next week.

The lockdowns around the world, aimed at curbing the spread of the Covid-19 novel coronavirus caused economies to halt, when had an adverse effect on the demand for oil, as reflected in a historical oil price crash in late April.

"The global lockdowns under Covid-19 saw fuel demand plummet. The resulting oversupply left storage bunkers full, with the extraordinary outcome that oil prices in the USA briefly dipped below zero," the AA statement said.

At the end of April all grades of petrol fell by R1.74 per litre from midnight from the beginning of May, while diesel declined by between R1.56 and R1.61 per litre.

The AA statement released on Friday warned that despite the moderate price rise for diesel, motorists are likely to encounter shortages of diesel in the short term.

In the same statement, the South African Petroleum Industry Association noted a faster recovery than expected, leading to a dramatic increase in the demand for diesel which refineries are currently not able to meet.

The AA said motorists should anticipate fuel prices slowly returning to their previous levels over the medium to long term and budget accordingly.

Compiled by Khulekani Magubane

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