South Africa’s petrol price formula to be reviewed — but a hike can’t be stopped

The Department of Mineral Resources and Energy (DMRE) will look to review the fuel price formula in South Africa on the back of rising crude oil prices but indicated that a fuel price cap was not feasible as government lacks the funds to do so.

This is according to DMRE mineral and petroleum regulation deputy-director Tseliso Maqubela, who explained what the government was considering during an interview with 702’s Africa Melane.

On Tuesday, 15 March 2022, the National Treasury suggested that the DMRE consider a fuel price cap to mitigate rising costs. It took a similar approach in October 2018, but Maqubela said that was not viable in this scenario.

“We believe that what we did in October 2018 is not feasible for this coming month because, at the time, we had R7 billion that was in the kitty,” Maqubela said.

“Currently, because the prices have been going up and up and up, we actually have exhausted all of that money that was sitting in the state account.”

Due to the lack of funding, Maqubela said that South Africa’s motorists would suffer the burden of globally-increasing fuel prices.

“So we don’t have the luxury now of setting aside the money that we owe the oil companies. Basically, that has got to come, unfortunately, from the motorists,” he said.

“However, what we want to say to South Africans is that this is happening globally. [If] you look at the UK, everyone is complaining about prices.”

He added that fuel prices at pumps in the US had increased by 20% in one month.

Data from the CEF show the retail price of petrol could increase by more than R2 per litre next month and the wholesale cost of diesel by more than R3

However, he believes that the mid-month price predictions will not actualise as peace discussions between Russia and Ukraine appear to be bearing fruit.

BusinessTech reported that prices were expected to increase by R2.19, R2.27, and R3.12 per litre for unleaded 93, 95, and 50ppm diesel, respectively.

“We don’t think it will get to that, fortunately, because there are signs that the peace talks are bearing fruit. So we actually are quite excited about that prospect,” Maqubela said.

“It looks like the predictions that were made yesterday will not actualise.”

“We don’t like predictions mid-month because a lot can change, and a lot actually has changed,” he added.

He explained that the changes included the peace discussions between Russia and Ukraine and the US federal reserve raising interest rates on Wednesday.

Maqubela explained that the fuel price emergency had been caused primarily by rising fuel costs due to the conflict between Russia and Ukraine and that the DMRE would look to review the formula used to calculate fuel prices.

“The biggest decrease in fuel prices will come at the end of this current war. If you look at the increase that is predicted for this month, the bulk of it comes from the crude oil price, and that has been increased because of the war,” he said.

“However, we did say with National Treasury, that let’s look at the existing formulas and then see where we can get a cent here, 10 cents here, and so on.”


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South Africa’s petrol price formula to be reviewed — but a hike can’t be stopped