South Africans face record-high gasoline prices in June as a subsidy to help motorists counter the impact of high crude costs exacerbated by Russia’s invasion of Ukraine comes to an end.
With a weighting of almost 5% in South Africa’s inflation basket, the expected jump in pump costs is likely to push the gauge above the central bank’s target range and spur price hikes across the economy. The government reduced the levy on fuel by 40% in April and May, helping to keep a lid on prices.
“We understand that it’s because of the war between Ukraine and Russia, but we are going to also have to increase taxi fares and customers are going to start fighting us because we have been increasing prices for people who aren’t getting anything from their jobs,” Dumisani Vilakazi, a minibus-taxi driver in Johannesburg as quoted by Bloomberg
In a research note, Absa Group Ltd. economists estimated that gasoline prices could jump “by a staggering 16% month-on-month” should the 1.50 rand (10 cents) a litre reduction in the fuel levy not be extended.
The Latest Central Energy Fund data show an average under-recovery on gasoline of about 2.40 rand per litre in May pointing to an increase for that fuel of about 10%, before adding in the full levy.
The government adjusts pump prices on the first Wednesday of each month after taking into account changes in oil prices, the currency, taxes and retailers’ regulated margins. The price of 95-octane gasoline in Johannesburg, the commercial hub, is currently 21.84 rand a litre.
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