Diesel prices to soar, despite fuel tax cuts

Diesel prices will rise sharply on Wednesday, potentially fuelling inflation in South Africa, despite government’s move to slash taxes to offset a price shock caused by Russia’s invasion of Ukraine.

Diesel with a 0.05% sulphur content will rise by R1.52/l, while diesel 0.005% will jump by R1.68/l. This will be a big worry for the Reserve Bank, given that the diesel price has a direct bearing on inflation.

In the telecommunications sector, the hike in the diesel price will also add to the costs of mobile operators, which often use diesel generators to keep their base stations running during bouts of Eskom load shedding and other disruptions to grid-supplied electricity.

Without the temporary tax relief measure announced last week by finance minister Enoch Godongwana – which cuts the price of petrol and diesel by R1.50/l until the end of May, diesel 0.005% would have risen by R3.14/l and diesel 0.05% by R3.30/l on Wednesday. Petrol 95 and 93 octanes would have risen by R1.95/l and R1.87/l, respectively.

“Apart from increasing crude oil prices, there is also a shortage of diesel supply due to lower exports from Russia as a major exporter of distillate fuel at discounted prices,” the department of mineral resources & energy said in a statement on Tuesday. “That is why the rate of price increase in diesel is higher than that of petrol.”

Petrol

Petrol prices, which haven’t been as severely impacted by the war, will rise by 28c/l for 93 octane and by 36c/l for 95 octane. This applies to both unleaded and lead-replacement petrol, the energy department said. Illuminating paraffin will soar by R2.66/l from Wednesday.

“The average Brent Crude oil price increased from US$96.47 to $109.37 during the period under review,” the department said, blaming Western sanctions on Russia for the spike. “This is disrupting energy flows as Russia is one of the biggest global exporters of oil.”

The department also blamed both Opec and non-Opec members for limiting fuel supply, even though demand has been increasing globally due to relaxed Covid-19 restrictions. It also pointed a finger at Yemeni rebels for attacking oil storage facilities in Saudi Arabia, resulting in supply disruptions.  – © 2022 NewsCentral Media