'Catastrophic' fuel price hike on the cards, AA warns

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The current picture shows petrol increasing by around four cents a litre.PHOTO: carmag.co.za
The current picture shows petrol increasing by around four cents a litre.PHOTO: carmag.co.za

A "catastrophic" fuel price hike is on the cards for November, the Automobile Association has warned.

Based on its calculations, R20 per litre for petrol was "realistic" before the end of the year, it said in a statement on its website on Monday.

The AA does not regulate or adjust fuel prices in SA, but it publishes two fuel price outlooks per month.

Fuel prices are officially calculated and adjusted on the first Wednesday of each month by the Department of Mineral Resources and Energy.

But based on its interpretation of recent exchange rate and commodities data, the AA said it was predicting "fuel price hikes of catastrophic proportions" at the end of October.

"The current picture is showing petrol up by 99 cents a litre, and diesel and illuminating paraffin higher by a whopping R1.42 a litre. This will push 95 ULP inland above R19/l (close to R19.30/l), and R17/l for diesel," the AA said.

"Taking this potential increase into account, the price of a litre of fuel inland (95 ULP) will have increased from R14.86/l in January to R19.30/l in November – a 30% increase over 11 months."

It added that the hikes in diesel and illuminating paraffin – if they came to pass as the AA predicted – would be "the largest in South African history". It added, however, that its prediction was still based on half a month's data.

The AA based its projection on the price of brent crude, which has broken through the US$85 per barrel mark. "[T]he basket of oil prices used to calculate South Africa's oil price are following Brent higher. We note the concern this is generating in the USA, where President [Joe] Biden was reported to have called on the OPEC+ cartel to increase oil output to stabilise prices. This has not generated a response from OPEC+, and our view is that a response is not likely, since the current price pressures are beneficial to the cartel’s members," the AA said in its statement.

The AA further noted the impact of the exchange rate, pointing out that the strength of the rand was a key factor impacting the fuel price and adding that South Africans were "paying at the pumps for weak governance".

In October, diesel and paraffin users saw an increase in prices, which the DMRE similarly attributed to higher oil prices and the rand-dollar exchange rate. The price of petrol dropped slightly.

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