Shocker fuel price hike despite extension of fuel levy relief

Finance Minister Enoch Godongwana has announced an extension of the temporary reduction in the general fuel levy (R1.50 c/l) until July 5, 2022, with effect from June 1, 2022. However, South Africans are still in line for a massive fuel price hike as of midnight.

The reduction in the levy was originally set for April and May 2022 only. But government has opted to extend it, thus avoiding increases of as much as R4/l for petrol.

With 93 octane petrol (both ULP and LRP) increasing by R2.43/l, it means the price for this fuel type in Gauteng/inland provinces will increase from R21.51/l to R23.94/l (as of 1 June).

The coastal price for 93 octane petrol will increase from R20.86/l to R23.29/l.

Other fuel price increases for June will be adjusted as follows:

• Petrol (95 ULP and LRP): R2.33/l increase;
• Diesel (0.05% sulphur): R1.10/l increase;
• Diesel (0.005% sulphur): R1.07/l increase;
• Illuminating paraffin (wholesale): R1.56/l) increase;
• SMNRP for IP: R2.08/l increase;
• Maximum LPGas Retail Price: 51c/kg decrease.

In a joint statement released earlier on Tuesday, the finance and mineral resources and energy departments said the continuation of the Russia/Ukraine conflict, supply chain bottle-necks and a tightening of global monetary policy have led to further unfavourable changes in the rand/dollar exchange rate and global oil price, leading to even larger increases in fuel prices compared to when the temporary fuel levy relief was first introduced.

“The withdrawal of the temporary relief in the general fuel levy… as per the original announcement, would [have contributed] to an increase in petrol prices of close to R4 per litre, and push prices of 95 octane unleaded petrol [ULP] to above R25 per litre, an increase of just under 20%”

After the levy relief extension to July 5, the relief is set to be slashed in half – to 75c/l until 02 August 2022. The temporary relief will be withdrawn from 03 August 2022, according to government.

The departments noted that the temporary reduction in the general fuel levy “will only smoothen the impact of persistently higher fuel prices on consumers and businesses, as the economy will need to adjust to this new reality.”

Oil price spike

In a separate statement on Tuesday afternoon, Minister of Mineral Resources and Energy Gwede Mantashe said the main reasons for the June fuel price adjustments are due to the average brent crude oil price increasing from $104.78 to $115 during the period under review.

“This in turn was due to increasing [oil] demand in the northern hemisphere, EU discussions regarding imposing sanctions on Russian crude oil and petroleum products, as well as the increase of crude oil throughput by refiners to take advantage of high refining margins.”

Mantashe added that the average international product prices of petrol, diesel and illuminating paraffin increased during the period under review while the price of LPG decreased. The rand also depreciated, on average, against the US Dollar from R14.90 to R15.95 during the period under review when compared to the previous one.

Other levies

Meanwhile, government has noted that the slate levy applicable remains in place at 52.62 c/l.

As of June 1, 2022, the Demand Side Management Levy (DSML) will be removed from the price structure of Unleaded Petrol (ULP) 95 Octane in the inland market, to provide some relief to applicable motorists.

“The levy of 10c/l was introduced in the price structures of 95 ULP that is sold in the inland market during 2005. The purpose of the levy was to discourage motorists from wasting octane by using 95 ULP instead of 93 ULP in their vehicles,” the joint statement explains.