Petrol prices predicted to increase in the month of June

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As preparations for the easing of the nationwide lockdown begins, can motorists expect an increase in fuel prices in the month of June?

According to unaudited mid-month fuel price data by the Central Energy Fund, petrol is predicted to increase by 50 cents a litre for petrol. However, the data predicts diesel will mostly decline by 56 cents, while illuminating paraffin will mostly see a 75-cent decline.

The Automobile Association explains that in a dramatic reversal of last month’s oil swings, international product prices used to calculate South Africa’s basic fuel price have nearly doubled since their lows at the end of April. 

During the same period, the AA explains the Rand has settled in around the level of R18.40 to the US dollar. This is almost three Rand weaker than just three months ago prior to the advent of the Covid-19 panic and multiple downgrades of the economy by ratings agencies.

Despite this, the AA explains that South African motorists currently have some unusual capacity to absorb fuel price increases.

This is because most grades of fuel are around R4 a litre cheaper than at the start of 2020. Motorists are also driving less far less since the start of the lockdown.  

“Our concern, of course, is that the financial situation of many South Africans has changed for the worse in the last two months, with massive job losses and talks of across-the-board salary cuts. This could make South Africans sensitive to even small fuel price increases,” the Association comments.

Furthermore, the AA says the differences between the movements for different fuel prices are likely to be related to imbalances in global refining capacity in the first week of May. This was as the oil industry came to grips with the unprecedented April oversupply and price crashes. 

The AA adds that it expects fuel price volatility to be substantial and long-lasting. This is as the world economy adjusts to the new reality of a spreading pandemic. 

“We advise motorists who are re-drawing their budgets to take nothing for granted,” the AA concludes.

What are your thoughts on the possible increase in petrol? Do you feel that the price hike comes at a bad time for South Africans? Or do you feel motorists will quickly adjust?

Share your thoughts and views with us in the comment section below.

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