Home Business and Technology Warning of yet another petrol price hike for June

Warning of yet another petrol price hike for June

Fuel solution

The latest data from the Central Energy Fund points to some slight relief for motorists at the pumps in June – but the new carbon tax coming in June could reverse this.

As at 14 May 2019, the CEF’s data shows a slight over recovery for both grades of petrol (93 and 95), pointing to a 5 to 7 cents per litre drop on the cards for June.

However, for diesel owners, things are not looking as good with the CEF showing an under-recovery of around 12 cents per litre.

Taken at these rates, the petrol price would see a drop to R16.62 (petrol 95) and R16.42 (petrol 93) next month, while the wholesale price of diesel would jump to R15.01.

The bad news for motorists is that June will see the introduction of a new tax. The carbon tax will come into effect on 5 June 2019 (the day the new prices kick in) and will add 9 cents per litre on petrol and 10 cents per litre on diesel.

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petrol price

This means that even with an over-recovery in the petrol price right now, the pump prices will likely see an increase.

The table below outlines the expected changes based on the current CEF data, taking into account the carbon tax.

Fuel (Inland) May Official Over/(under) recovery Carbon tax June Expected
95 Petrol R16.67 R0.05 (R0.09) R16.71
93 Petrol R16.49 R0.07 (R0.09) R16.51
0.05% Diesel (wholesale) R14.89 (R0.12) (R0.10) R15.11
What’s driving petrol prices

The key drivers behind the petrol price in South Africa are international petroleum prices – driven largely by oil prices – as well as the rand/dollar exchange rate.

On the exchange rate front, South Africa’s weakening rand ahead of the elections has put pressure on imports, with a trade war between the USA and China leading to volatility in the global markets.

This has been the main contributing factor to an under-recovery in the petrol price, the CEF’s data shows.

However, the movement in international prices has also fluctuated over the past two weeks, with international oil prices dropping from $75 per barrel highs to under $70, before swinging back again to settle at the current spot price of $71 per barrel.

Economists predict that the oil price could reach $80 a barrel in 2019, which would lead to further hikes in the petrol price. In a worst-case scenario, at $90 a barrel, the petrol price could go as high as R20 a litre.

According to PwC chief economist Lulu Krugel, for every $1 movement in international oil prices, there is a 25c impact on the local petrol price in the same direction.

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Source: businesstech

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