Russia’s invasion of Ukraine is already having a major impact on crude oil prices, but a worst-case scenario would see South Africa’s fuel prices almost double.
This is according to André Thomashausen, an emeritus professor of international law at Unisa, who was speaking with IOL.
“In a worst-case scenario, South Africa could expect liquid fuel prices to increase to about R40 per litre,” said Thomashausen.
“As Eskom energy production depends much on imported diesel, electricity prices could increase by up to 40%.”
“This could have a devastating effect on all the parameters of the current budget and sink South Africa’s hopes for a post-Covid economic recovery,” he added.
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.
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.
The price of diesel also increased by between R1.44 and R1.48 per litre.
The global price rise of crude oil is not the only reason for South Africa’s exorbitant fuel prices.
The Organisation Undoing Tax Abuse explained that combined levies on motorists rising by 126% over ten years are another big reason South Africans are paying such high prices for fuel.
Some good news on this front is that government has announced it would not increase the General Fuel Levy (GFL) and Road Accident Fund (RAF) levy for the 2022/23 financial year.
Finance minister Enoch Godongwana also announced that he is working with energy minister Gwede Mantashe to review South Africa’s fuel price.
“The intention is to review the fuel price and its structure,” said Godongwana.
“The intention is to make sure that we can have a petrol price which is competitive with this economy.”