Petrol to cost less from tomorrow but it remains a risk to inflation

MOTORISTS will benefit from a 10 cents a litre (c/l) drop in the price of 95 ULP petrol, while refined diesel (0.005 percent sulphur) will rise 21c/l following the effects of rising global oil prices and a weaker rand on the government-set local fuel prices.

South Africa’s fuel prices are adjusted monthly, informed by international and local factors.

The average Brent crude oil price increased to $66 (about R906.71) from $64.16 a barrel in the period under review, the Department of Mineral Resources and Energy said in a statement yesterday.

“The oil prices remain at high levels as the season for oil demand is approaching and the lockdown restrictions are lifted in most European countries and the US,” the department said.

International refined petroleum product prices of diesel and illuminating paraffin had followed the increasing trend in crude oil prices.

This led to higher contributions to the basic fuel price of petrol, diesel and illuminating paraffin by 6.28c/l, 35.52c/l and 36.67c/l, respectively.

However, the rand appreciated, on average, to R14.11 per dollar during the period, versus R14.48 per dollar in the previous period.

This led to lower contributions to the basic fuel prices of petrol, diesel and illuminating paraffin by 17.14 c/l, 16.32 c/l and 15.96c/l respectively.

The illuminating paraffin price will increase by 20c a litre. The maximum LPG retail price fell by 143c a kilogram.

High fuel prices have been causing producer inflation in South Africa to trend higher, as petroleum, along with some other chemicals such as coke and rubber and plastic products, were blamed for producer price inflation increasing by 6.7 percent year-on-year in April 2021, from 5.2 percent in March 2021. “It was the highest producer inflation rate since November 2018,” Alexander Forbes Investments said in their latest weekly Economic Focus. This had followed a 4.4 percent surge in consumer inflation in April, from 3.2 percent year-on-year in March, which had been driven by prices of transport.

Last week the South African Reserve Bank shared its concern around the inflation outlook, with the Monetary Policy Committee statement pointing to higher oil prices and price pressures from raw materials and intermediate inputs to food, said Oakland Group managing director Ian van Niekerk.