Business /29 November 2021, 18:45pm/ Mandla Nkosi
Johannesburg – South African motorists and commuters are facing a full blown crisis, with both petrol and diesel set to go up by a massive margin in December, pushing the petrol price past R20 per litre for the first time ever.
According to the Department of Mineral Resources and Energy, both grades of petrol will go up by 81 cents per litre from Wednesday, December 01, while 50ppm diesel will increase by 74 cents and 500ppm by 72 cents. Illuminating paraffin will rise by 42 c/l.
The December fuel price adjustment will see the cost of 95 Unleaded Petrol rising to R19.63 per litre at the coast and R20.35 in the inland regions, where 93 Unleaded will rise to R20.13.
The wholesale price of diesel will increase to R17.30 at the coast and R17.92 in Gauteng, keeping in mind that the unregulated retail prices (which vary between outlets) will be somewhat higher than that.
What’s driving the prices higher?
The price of Brent Crude oil increased marginally during the month of October, from an average of $82.50 per barrel to $83.00. This alone would not have made a big difference to the December fuel price, however, the rand depreciated from an average of R14.72 in the previous month to R15.85 this month, the energy department said. The Slate Levy, which is used to compensate the industry for cumulative under recovery, also saw an increase of 26.30 c/l.
Fuel taxes and levies currently account for R6.11 per litre of fuel, a fact which is proving increasingly controversial as higher oil prices and a weak rand drive prices up on a monthly basis.
The hike in prices are due to a weaker rand and higher oil prices during the period under review.
The rand depreciated, on average, against the US dollar (from R14.72 to R15.85) during the period under review. This led to higher contributions to the Basic Fuel Prices of petrol, diesel and illuminating paraffin by over 34 cents per litre.
The key driver is the higher global demand recovery amid a weaker supply response from non-OPEC and other oil producers.
There is a mismatch between demand and supply, i.e., there is more demand for oil products than the market can supply.
The US and other major oil consumers are coordinating efforts to try to lower high prices by releasing oil from their inventory stocks, while OPEC and Non-OPEC members are refusing to increase oil production to match the global recovery demand.
“It is important to appreciate that fuel prices are soaring worldwide due to persistently high crude oil prices. Record pump prices have been experienced in many other countries,” the department said.
The department said it is aware of the inflationary nature of the high global fuel prices and the impact on the transport costs for commuters.
It said it is also making margin adjustments on fuel prices and adjusting the slate levy, adding to the fuel price hikes.
In line with the application of the Regulatory Accounting System (RAS) the minister of Energy approved a net increase of 17.84 c/l in the annual margin adjustments on petrol and a net increase of 8.20 cents per litre on diesel and illuminating paraffin wholesale prices, with effect from the 1 December 2021.
An increase of 26.30 c/l (i.e. from 15.36 c/l to 41.66 c/l) will be implemented into the prices structures of petrol and diesel in line with the Self-Adjusting Slate Mechanism rules.