Petrol heads for R29 a litre as mid-month data points to R2,29 hike

eNCA reports that motorists should brace for another steep fuel increase in October, with mid-month Central Energy Fund data pointing to a petrol price hike of about R2,29 a litre. That would push inland petrol prices above R29 a litre. You can read the original report here.

The numbers behind the projection are the ones that have driven every fuel cycle this year. Brent crude is trading above 108 dollars a barrel and the rand is sitting near R16,25 to the dollar. When the oil price climbs and the local currency weakens at the same time, the import bill for every litre of fuel rises in rand terms, and the adjustment is passed through to the pump.

Diesel is under the same pressure. Wholesale prices are projected to rise by more than R2 a litre, according to the mid-month data. That matters beyond the passenger car in the driveway, because diesel is the fuel that moves freight, runs generators at businesses that cannot afford to stop, and keeps tractors and delivery bakkies on the road. A wholesale diesel increase feeds into the cost of getting goods to a shelf before it feeds into anything else.

The rand is doing half the damage

It is worth separating the two drivers, because they call for different responses. The oil price is set in a global market South Africa does not control. The rand, however, is where domestic policy, investor confidence and global risk appetite meet. A rand at R16,25 to the dollar means every barrel bought abroad costs more in the currency South Africans earn.

That combination is what the Central Energy Fund’s mid-month snapshot captures. The fund publishes an indicative picture partway through each month, and while the final adjustment is confirmed later, the direction of travel is rarely reversed by the time the official announcement lands.

For a motorist filling a 50-litre tank, a R2,29 increase adds roughly R115 to a single fill. For a small business running a delivery fleet, the diesel number is the one that hurts, because it multiplies across every vehicle and every trip.

What relief would cost

The pressure has produced calls for fuel price relief. National Treasury has said any help would need to be balanced against other government spending needs, which is the honest answer to a difficult question. The fuel levy is a substantial and reliable source of revenue, and it funds roads, public transport and services that households depend on. Cutting it is not free. It simply moves the cost from the pump to somewhere else in the budget.

That does not make the calls unreasonable. It means the trade-off has to be named rather than wished away. A targeted intervention, if one is designed, would have to answer who pays for it and what gets less funding as a result.

What to watch

The official fuel price adjustment for October will be announced by the Department of Mineral Resources and Energy towards the end of September, and it takes effect at midnight on the first Wednesday of the month. Until then, the mid-month Central Energy Fund figures are the best available signal, and they point one way.

For households already carrying higher electricity and water bills, the fuel number is the third leg of the same squeeze. The practical response available to most people is unglamorous: consolidate trips, check tyre pressure, compare forecourt prices in your area, and where an employer offers a travel allowance, understand how it is calculated. The larger question, of how the country structures a fuel price that does not punish the people who have to drive to work, is one for Treasury and for the policy choices that shape the rand.

Source: eNCA. Read the original item.