International oil prices continued to climb on Tuesday, with Brent crude oil edging up to $108.06 per barrel as the Crisis in the Middle East showed no signs of abating. Recent oil price movements will have dire consequences for South Africans at the pumps next month.
The latest daily snapshot from the Central Energy Fund indicates potential increases of up to R2.41 for 95 Unleaded petrol in October, while diesel looks set to increase by between R2.04 for 500ppm and R2.40 for 50ppm.
Recent movements in international oil prices mean these projections continue to rise – just a week ago, the data was pointing to price hikes of R1.92 for petrol and R2.03 for diesel. But the bottom line is that South Africa is almost certainly facing record fuel prices next month.
According to the current estimates, motorists will pay around R28.30 at the coast and R29.32 for a litre of 95 Unleaded in Gauteng, surpassing the previous records of R27.19 and R28.06. The wholesale price of 50ppm diesel looks set to rise to at least R31.94, towering over its previous high of R30.62.
These increases will come in the wake of steep increases already implemented in September, when both grades of petrol rose by R1.34 a litre and diesel increased by between R2.94 and R3.15.
No government relief in sight
To make matters worse, government is unlikely to reinstate the temporary fuel tax relief measures that were implemented earlier in the year.
Responding to a parliamentary question last week, Finance Minister Enoch Godongwana said that cushioning the blow for consumers would not be an easy task from a fiscal perspective.
“Permanently offsetting these increases through the budget would ultimately shift the cost to taxpayers or increase government borrowing,” the minister said.
“Fiscal policy therefore involves trade-offs: providing additional relief to consumers must be weighed against the impact on other spending priorities, taxation and government borrowing.”
South Africans currently pay a general fuel levy of R4.10 per litre for petrol and R3.93 per litre for diesel.
Oil prices spiral
International oil prices climbed sharply on Monday, with Brent crude surging past the $107 mark as escalating tensions in the Middle East fuelled fears of disruptions to global energy supplies.
Brent now sits at a four-month high after gaining 9% last week, when it broke above the $100 threshold for the first time since July.
According to AFP, the market remains firmly focused on the Middle East, where fresh security concerns threatened key export routes.
International oil prices have surged to four-month highs.
Saudi Arabia temporarily shut its East-West pipeline after drone attacks in the area, while a merchant vessel was struck in the Strait of Hormuz on Sunday, killing one person and injuring three others, Iranian authorities reported.
While the Strait was free to transit before the war started, Iran now requires vessels to obtain permission before crossing and is also considering imposing service fees. Ships that do not comply are regularly targeted by Iranian strikes, adding to the uncertainty surrounding global oil supply.
Furthermore, Oman has postponed talks between Iran and Gulf states on the future of the strategic waterway.
Peace deal on hold
Last week, US President Donald Trump predicted that the war with Iran would end immediately after the November 3 midterm elections. He argued that Tehran is prolonging the conflict in order to influence the vote, and said that fuel prices would therefore not fall before then.
“The forecast deserves scepticism, given that when the campaign began on 28 February, the expectation was that it would only last for a few weeks, but the market now has a political date, attached to a military escalation that has lasted for eight weeks in which no de-escalation has been sought,” said Bianca Botes, managing director at Citadel Global.
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