Fuel price underrecoveries are currently between R2.50 and R5.50 per litre, with one more week left in the four-week period that determines May’s prices.
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- Large diesel and petrol price hikes are likely in May, as Middle East tensions continue to affect oil prices and the rand.
- Much will depend on what happens between the US and Iran in the coming week.
- If the SA government does not extend its fuel levy relief, retail diesel prices may hit R40 in some parts of the country.
- For more financial news, visit News24 Business.
If fuel prices were to change today, a massive increase of almost R6 per litre in diesel prices would yet again hit motorists, farmers, the country’s distribution network for most consumer goods – and therefore consumers for a second round.
This would push the wholesale price of diesel close to R32 a litre in Gauteng (R31 on the coast) – or to R35, if government decides to scrap its fuel levy relief. At these levels, the eventual retail price of diesel may breach R40 in some parts of the country.
Only one more week is left of the four-week period determining May’s fuel prices, and the underrecoveries, rounded, look grim:
- 95-octane petrol: R2.14 per litre;
- 93-octane petrol: R1.82 per litre;
- Diesel with 0.05% sulphur (500ppm): R5.92 per litre;
- Diesel with 0.005% sulphur (50ppm): R5.93 per litre; and
- Paraffin: R4.99 per litre.
The diesel and paraffin underrecoveries are for wholesale prices; retail diesel prices are not regulated.
Underrecoveries reflect how much motorists and others are currently paying “too little” for fuel, based on international fuel prices on the open market and the rand-dollar exchange rate.
The four-week period ends on 30 April, and fuel prices change on the first Wednesday of the month – in this case 6 May.
May’s expected increase – which could still increase or decrease until next Thursday – will see the third monthly increase in fuel prices, following a R3.06 per litre petrol price increase in April and a 20c increase in March. Diesel prices increased by up to R7.51 per litre in April and by up to 65c in March.
Diesel prices are at an all-time high, but, for now, petrol remains cheaper than in several months of 2023 and 2024.
The May underrecovery tally is largely due to continued increases in international fuel prices. The slightly weaker rand contributes only about R1 per litre to the increases.
The rand has improved from R17.18 per dollar at the end of March, but remains under pressure at around R16.65 on Friday.
On the oil price front, Brent crude prices are back above $100 as stalled US-Iran peace negotiations and the continued closure of the Strait of Hormuz fuel supply concerns.
In a social media post on Thursday, US President Donald Trump said he had ordered the US Navy to “shoot and kill” vessels laying mines in the strait, while US forces also boarded a supertanker carrying Iranian oil in the Indian Ocean.
Meanwhile, Iran showed its control of the Strait of Hormuz on Thursday, releasing footage of its forces storming a cargo ship.
On a more positive note, a US-Iran ceasefire has been extended indefinitely as Washington awaits a new formal proposal from Tehran, while the truce between Israel and Lebanon has also been prolonged by three weeks.
Apart from the underrecoveries, there are a few questions surrounding the May fuel prices.
Will the fuel levy relief be extended?
To avert a R6 increase in petrol prices and a R10 increase in diesel prices, Finance Minister Enoch Godongwana announced a relief of R3 per litre on the general fuel price levy in April.
The R3 needs to be added back to fuel prices at some point, but Godongwana recently said Treasury could extend the relief by another two months, at the very most. An announcement about this needs to be made by 5 May at the latest.
READ | It’s a maybe: Godongwana says fuel levy support could be extended two more months
Will a slate levy be instituted?
Following two months of increases, the slate account might be dented, increasing the risk of a slate levy being added to fuel prices.
The slate account is used to pay fuel importers for the difference between the regulated fuel price they are allowed to charge and the actual price they pay to import or manufacture fuel during that month, which varies daily on international markets and is also affected by the fluctuating rand-dollar exchange rate.
READ | Fuel price and inflation surge: Will your salary increase keep you afloat?
A slate levy must be paid out when the account is more than R500 million in the red. By the end of February, the fund still boasted a positive balance of R4.93 billion. While the April price shock may have had a bit of an impact, March fuel price increases were minimal; the account might still have been positive by month-end. There is a two-month lag in adjusting the account.
READ | Buckle up for severe interest rate hikes – unless the war ends soon
The current price of 95-octane petrol in Gauteng is R23.36 per litre, and R22.49 per litre at the coast. The rounded wholesale price of 500ppm diesel is R25.91 in Gauteng and R25.04 per litre at the coast.
The increase in fuel prices, and especially the second-round effects, have raised fears of a sharp spike in SA’s inflation rate and possibly interest rate increases.
