South Africans face record high petrol prices in June as a subsidy to help motorists counter the impact of high crude oil costs worsened by Russia’s invasion of Ukraine comes to an end.
With a weighting of almost 5% in SA’s inflation basket, the expected jump in fuel costs is likely to push the gauge above the central bank’s target range and spur price hikes across the economy. The government reduced the levy on fuel by 40% in April and May, helping to keep a lid on prices.
“We understand it’s because of the war between Ukraine and Russia, but we are going to also have to increase taxi fares and customers are going to start fighting us because we have been increasing prices for people who aren’t getting anything from their jobs,” said Dumisani Vilakazi, a minibus taxi driver in Johannesburg.
Absa economists estimated in a research note that petrol prices could jump “by a staggering 16% month-on-month” should the R1.50/l reduction in the fuel levy not be extended. Latest Central Energy Fund data show an average under-recovery on petrol of about R2.40/l in May, pointing to an increase for that fuel of about 10%, before adding in the full levy.
Mondli Gungubele, minister in the presidency, referred questions at a post-cabinet meeting on Thursday on whether the levy waiver will be extended to the National Treasury.