Supermarket & Retailer Logo
Supermarket & Retailer Logo



2022-03-07

Shock petrol price increases coming for South Africa

South African motorists face further petrol hikes over the coming months as oil prices increase – with a R2/litre hike expected in April based on current trajectories.


Staff Writer | Business Tech

The shock of surging oil prices cascaded through financial markets Monday (7 March) as investors sought to price in the impact of a potentially prolonged period of higher global energy costs.

Oil prices soared to their highest since 2008 at $129/barrel due to delays in the potential return of Iranian crude to global markets and as the United States and European allies consider banning imports of Russian oil.

“The world economy can manage to withstand oil prices around $120 per barrel, but if they rise to $150 to $160, there will be a recession and investors will have to change their scenarios that the global economic recovery will continue,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management told Bloomberg.

The prospect of US-led sanctions on Russian energy exports has propelled commodity prices and fanned fears of a ‘stagflation’ scenario, where spiralling costs coincide with a growth downturn.

“The signals are pretty clear about rapidly rising risks of a recessionary outcome globally,” said Homin Lee, Asia macro strategist at Lombard Odier.

“The consensus is shifting from a hard war that’s ending quickly to more protracted conflict. Bonds rallying, commodities strengthening and equity markets taking hits. This is basically an expression of recession fear.”

March price increases 

At this stage, the oil prices are signalling that domestic fuel prices could increase by as much as R2/litre in April, the Bureau for Economic Research (BER) said in a note on Monday.

“Depending on oil price moves in the rest of the month, the increase could be significantly more than R2/litre. This follows a hefty petrol price hike of about R1.50/litre in March. Reports over the weekend of ‘active discussions’ between the US and European partners about a ban on Russian oil imports pushed oil prices up significantly further in Asian trade this morning.”

André Thomashausen, emeritus professor of international law at Unisa, has warned that in a worst-case scenario, South Africans could expect to pay as much as R40 for a litre of fuel.

Daily petrol price data from the Central Energy Fund (CEF) shows South Africa was currently on track for a petrol price hike of between R1.88 and R1,93 at the end of March, although this could still climb further if global oil prices continue to climb.

Investec chief economist Annabel Bishop said that global oil prices and further rand weakness are likely to be heavily dependent on the level of aggression seen in Ukraine by Russia. With the war remaining only between these two countries, there is little current likelihood perceived of a third world war, she said in research note this week.

South Africans already pay over R21 per litre of petrol inland after the energy department announced a R1.46 per litre increase that kicked in on 2 March 2022. Motorists who live inland will pay R1,281 to fill up a 60-lire tank with 93 unleaded — R87.60 more than in February.

Agri Enterprises agricultural economist Shané Rudolph also told the City Press that a steep rise in oil prices directly affects farmers’ costs, which could cause significant food price increases.

For example, fuel costs make up about 13% of grain production costs, and about 80% of South Africa’s grain is transported by road.

This is exacerbated by the fact that fertilizer prices have risen by about 70% recently because Russia is historically the world’s largest exporter of fertilizer.

 


Read more | Original article 
Back
 

Related News Articles