THE government is staying mum about its discussions to review the way petrol is priced, as the global oil price threatens to soar to an all-time high following the war in Ukraine.
Analysts yesterday warned that motorists could be looking at further record-high fuel price increases for April, due to supply constraints as the government dithers over easing fuel prices.
The oil price jumped early yesterday to its highest levels since the 2008 global financial crisis, with Brent crude briefly touching $139 (R2136) a barrel before slipping back below $130 on supply fears.
In a note, economists from the Bureau for Economic Research (BER) led by Hugo Pienaar, yesterday said the local impact of the extraordinary oil price gains was signalling that domestic fuel prices could increase by as much as R2 a litre in April.
“Depending on oil price moves in the rest of the month, the increase could be significantly more than R2/litre,” BER said.
“This follows a hefty petrol price hike of about R1.50 per litre in March.”
The US is in active discussions with European partners about banning Russian energy exports, which could tilt the scales as Russia exports about 4.5 million barrels of crude a day.
The oil price escalation was exacerbated by delays in the potential return of Iranian crude that could bring about 500 000 to 1 million barrels a day to the global market.
In 2008, demand destruction occurred when the Brent crude prices hit $147.50 in July 2008, shortly before the global financial crisis.
However, Exinity chief market strategist Hussein Sayed said the current spike in prices was not a demand-driven shock, but a supply-driven one, and there was no ceiling in sight.
Sayed said sanctioning Russian oil posed serious negative consequences for the global economy.
“If exports were cut in half, prices would likely remain elevated in the short- to medium-term around current levels, even if the US and other nations release oil from their strategic reserves,” Sayed said.
“However, if the crisis gets worse and Europe imposes sanctions on Russian oil with no response from OPEC members, expect prices to jump above $200.”
Minister of Mineral Resources Gwede Mantashe last week said he was in discussion with his counterpart Enoch Godongwana on whether or not to review the formula for the petrol price.
In his Budget speech last month, Godongwana also said the intention was to review the structure of the petrol price going forward in a bid to be competitive in this economy.
The petrol price increased by R1.46 this month, pushing it beyond R21 a litre inland, and is likely to rise further in the absence of any interventions.
Investec chief economist Annabel Bishop said there would be upwards food price inflation pressures if oil prices remained elevated without some government price controls, given both import and export parity pricing in South Africa.
“A high proportion of South Africa’s fuel prices are government levies, and temporarily removing these would reduce a sudden extreme fuel price jump, while state support to combat the effects of food spikes such as bread prices on rapid wheat price escalations would also be necessary,” Bishop said.
It was not just oil prices hitting multi-year highs, as commodity prices have seen a price surge recently.
The price of gold topped $2 000 an ounce for the first time since August 2020 yesterday, just $70 shy of its record peak, as geopolitical and economic uncertainties lifted demand for the safe-haven metal.
The rand also weakened to R15.30 to the US dollar by 5pm, as the markets worry that the war will persist longer than anticipated.
Stocks also fell the lowest in nearly two weeks as the JSE All Share index eased 1.88 percent to around 73 331 index points, its lowest since February 25, as Russia intensified its offensive in Ukraine.
BUSINESS REPORT ONLINE