Record gasoline price increase in April is likely to come lower than expected: economists

South Africa is set for another steep rise in petrol prices in April, but a combination of lower oil prices and a stronger-than-expected local currency means the blow will probably not be as bad as originally feared, say economists at the Bureau of Economic Research ( BER).

“In commodity markets, the future of the one-month Brent roll closed more than 4% lower this week – its second weekly loss,” the group said in a research note on Tuesday (March 22).

“As Rand’s exchange rate remains relatively strong, this means that the recurring fuel price – indicative of the likely price increase in April – fell below R2,00 / liter for petrol, even though it remains above R2.50 / liter for diesel, “it said.

Mid-month estimates had the petrol price increase close to R2.50 / liter for petrol and more than R3.00 / liter for diesel, prompting the government to step in to knock-out the effects. help.

However, the Central Energy Fund’s daily snapshot on March 22, 2022 shows that the under-recovery has been slightly reduced to around R1.90 per liter for petrol and R2.80 for diesel.

The record-high increases are still expected to affect the local economy in the coming months, warned economists at Nedbank.

“Crude oil and refined petroleum together account for 16.4% of total imports, while intermediate and capital imports combined account for 58.6% of total imports,” the bank said in a note this week.

“South Africa will feel the effects of sharply higher energy prices and the general rise in intermediate and capital goods prices through supply chain bottlenecks. As a result, import prices are expected to grow at a faster rate than exports, resulting in a further decline in South Africa’s trade conditions.

The National Treasury detailed its official proposals to tackle South Africa’s record petrol prices in a presentation to parliament on 15 March.

Treasury said it had limited its proposals to four options, with a combination of these proposals probably the most effective:

  • A potential one-time reduction of between 3 cents – 18 cents / liter as part of a recommended Basic Fuel Price review that could be introduced immediately;
  • A review of the Regulatory Accounting System (RAS) methodology for gasoline could result in a significant decline of R1.03 cents / liter by 2028. However, this will take much longer to realize than other measures and studies need to take place to fully understand the changes that can be implemented.
  • Changing the Road Accident Fund Charge to Make a Lower Total of the Current Basic Fuel Price. Currently, National Treasury regulates levies accounted for 30% of the total pump price. The Treasury said a reduction in the RAF levy would be possible as the Road Accident Fund sees operational changes and improvements over the next three years.
  • Consideration should be given to a cap for fuel price, although this also requires important research first.

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Record gasoline price increase in April is likely to come lower than expected: economists

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