SA fuel prices will plunge, but only briefly

Fuel prices will drop in March before the new fuel levies take effect in April.
Fuel prices will drop in March before the new fuel levies take effect in April.
Image: Supplied

Finance minister Tito Mboweni hit motorists with steep fuel price increase in his 2020 budget speech on Wednesday, with a 25c a litre fuel levy to be implemented on April 1.

Before then, however, car owners can expect a brief reprieve with the prices of diesel and petrol set to drop next month.

The AA forecasts month-end fuel price declines of between 9c and 19c a litre for petrol, 55c a litre for diesel, and 68c for illuminating paraffin.

"International petroleum prices this week suffered one of their steepest plunges in recent years as coronavirus fears hit global economic activity. The silver lining in this cloud are predicted substantial fuel price reductions for South Africans," said the AA.

"The impact of the novel coronavirus outbreak on global economic activity cannot be over-stated, and petroleum prices have retreated in lockstep with the downturn across world markets," the AA says.

"In normal circumstances, we would be focusing on our serious concerns over the rand's trajectory, with the currency having depreciated by nearly 30c against the US dollar since the start of February. However, these declines have all been overrun by the pullback in oil."

On Wednesday Mboweni announced a combined 25c increase to the two main fuel levies: 16c will be added to the general fuel levy, bringing it to R3.63 on every litre of fuel, and motorists will pay 9c more for the Road Accident Fund levy, bringing it to R2.07 on every litre of fuel.

From April, motorists will pay R5.70 towards these two taxes, accounting for nearly 40% of the price of fuel. 

"It is difficult to predict where current events might lead us. The rand has not found strength against the US dollar since Mboweni's budget speech, and the consensus of economists is increasingly that South Africa is set to lose its last remaining investment grading before long," the AA says.

"This will inevitably affect the rand/US dollar exchange rate, but the precipitous global decline in confidence and economic output as the coronavirus outbreak spreads could provide a balancing factor in the form of lower international petroleum prices."

The association said South African fuel users should not take any outcome for granted, since the full effects of the coronavirus and future South African economic conditions are far from clear.

"Knock-on effects cannot be predicted and it would be unwise to budget for further fuel price drops at this stage," the AA said. 

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