Nicolette Dirk, finance writer, Justmoney.co.za
Petrol is set to go up by 36 cents this Wednesday (5 March 2014), however, economists predict that consumers will have to fork out up to 60c more on overall fuel costs by the beginning of next month.
Dawie Roodt, an economist at financial services company Efficient Group explained that another 20c increase in fuel will commence in April for the fuel levy and the road accident fund.
In his Budget Speech last week, Minister Pravin Gordhan said that in recognition of recent increases in the imported cost of fuel, the general fuel levy increase is limited to an inflation-related 12 cents per litre on 2 April 2014, and the road accident fund levy will increase by 8 cents per litre.
What is causing these price hikes?
Since the beginning of this year, consumers had to grin and bear two petrol price hikes that collectively came to 75c/litre.
The Department of Energy cited this week’s price hike to movements in the crude oil prices, international petroleum products prices as well as the Rand/US dollar exchange rate, which has been dwindling this year.
According to a statement by the Department of Energy the average Rand/US dollar exchange rate depreciated from R10, 67/USD to R11, 03/USD during the current review period (31 January to 27 February 2014).
One of the reasons for the depreciation of the Rand against the dollar was the disappointing Chinese manufacturing data, which reinforced concerns of a slowdown in the world’s second biggest economy and also South Africa’s biggest trading partners.
Roodt said he was surprised at the performance of oil prices as he expected it to go down this year. But the price of Brent crude oil in fact increased slightly on average from 107 to 185, 85 USD/barrel during the current fuel price review period.
The Department of Energy said that the increase in oil prices was caused by the cold weather in the United States during January and February. It lead to the increase in demand for space heating fuels, disrupted crude oil and natural gas production as well as refinery, rail and pipeline operations.
What should consumers expect for this year?
With the second price hike for 2014, which took place on 5 February, economists predicted that motorists could pay up to R16/litre on petrol
Roodt warned that the next two months are crucial when it comes to petrol price hikes.
“The Rand took a huge knock against the dollar these past few months. After April, the Rand should stabilise and consumers could also see a slight decrease in the petrol price,” said Roodt.