South Africans, reeling from record fuel price increases in April, could be facing even more damaging fuel price increases in May if the tensions surrounding the Strait of Hormuz are not resolved this week.
Image: Tumi Pakkies / Independent Newspapers
South Africans, reeling from record fuel price increases in April, could be facing even more damaging fuel price increases in May if the tensions surrounding the Strait of Hormuz are not resolved this week.
Early month data from the Central Energy Fund (CEF) is pointing to diesel price increases of more than R10 per litre, over and above the price hikes of between R7.37 and R7.51 that were implemented on April 1.
The latest CEF snapshot, released on April 7.
Image: CEF
The petrol price outlook is less severe, but significant nonetheless, with CEF data pointing to likely increases in the region of R3 per litre.
Although the month average under-recovery is currently between R4.29 (for 93 Unleaded) and R4.69 (for 95 Unleaded), the latest daily data is R2.00 to R2.52 in the red, suggesting that the former figures could be reduced before month-end.
Brent Crude oil was hovering around the $111 mark on Tuesday morning, which is significantly higher than its average of $94 during the previous review period that determined April’s fuel prices.
The latest oil spikes come after Donald Trump threatened to “decimate” Iran if it failed to reopen the critical Strait of Hormuz oil passage by midnight (00:00 GMT Wednesday).
"We have a plan... where every bridge in Iran will be decimated by 12 o'clock tomorrow night, where every power plant in Iran will be out of business, burning, exploding and never to be used again," Trump said on Monday.
On Tuesday morning, reports emerged that Iran had rejected a proposed truce deal, despite the stark threats by the US president.
The IRNA news agency reported that Iran, speaking through mediator Pakistan, had rejected a ceasefire proposal, while insisting on the need for “a definitive end to the conflict.”
Tehran’s demands reportedly include an end to conflicts in the region, a protocol for safe package through the Strait, reconstruction and the lifting of sanctions.
Fuel price crisis
Following April’s record increases, a litre of 95 Unleaded petrol currently costs R22.53 at the coast and R23.36 in the inland regions, where 93 Unleaded retails R23.25. The wholesale price of 50ppm diesel rose to R25.35 at the coast and R26.11 in Gauteng.
The above-mentioned under-recoveries related to the oil price could be further exacerbated by the Slate Levy, which compensated oil companies for over- and under-recoveries that took place in the preceding review period. This self-correcting mechanism is in place because while fuel prices are adjusted once a month, oil is bought and sold continuously.