Fuel prices set to spike again in July if gov doesn’t play ball

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Further petrol price increases are expected in July 2022 and are set to see South Africans adjusting their budgets once again.

As motorists anxiously wait for the looming price hike, earmarked for 6 July 2022, the Ukraine/Russian war continues to see the international price of oil bouncing between $110 and $120 per barrel. For most of June 2022, this price has remained closer to $120, which is approximately 7% up on May 2022.

Adding to this, Wayne Duvenhage, CEO of Organisation Undoing Tax Abuse (OUTA), explained that coupled with the increased price of oil, the rand was weaker against the US dollar for most of June. This gave rise to under-recovery.

According to Duvenhage, these factors are expected to increase the price of petrol by an estimated R1.75 on 6 July.

“The fuel levy reprieve of R1.50 per litre has been in place for April, May and June. Should the Minister of Finance Enoch Godongwana reduce this to a reprieve of 75c per litre from 6 July to 2 August, as planned, we can expect a petrol price increase of around R2.50 in July, thereby pushing the price of 95 octane inland from R24.17 per litre to around R26.70,” pointed out Duvenhage.

Moreover, Duvenhage explained that while OUTA understood the negative impact of around R2.8 billion in tax revenue to the fiscus for every month the R1.50 per litre fuel levy reprieve remains in place, the organisation believes that while petrol prices remain above R22 per litre, the Minister would be wise to retain the full R1.50 reduction.

“Accordingly, we believe the Minister should not reduce the fuel levy reprieve to 75c in July, but wait until the geopolitical factors, combined with an improvement in the rand exchange rate, are able to bring about significant reduction to the price of petrol,” he explained.

Duvenhage further explained that the price of petrol is subjected to taxation or levies in virtually every country, and in South Africa. The general fuel levy is the fourth largest tax source for Treasury (after PAYE, VAT and company tax), generating around R89 billion per annum for the fiscus.

OUTA said it was not naïve enough to believe the State would scrap the entire fuel levy going forward, or at least certainly not during these times of heightened fiscal pressure. However, the organisation noted that the fuel levy is one of the tax elements that Government is able to adjust at short notice.

“We also believe that Government must find a solution to the runaway costs of the Road Accident Fund (funded by another fuel levy of R2.18 per litre), which requires urgent professional intervention. This levy should either be reduced or not tied to the price of petrol,” said Duvenhage.

Lastly, OUTA claimed it has also asked that Government challenges the runaway increases pertaining to the retail margin, which currently sits at R2.29 per litre.

“This margin is due for another increase later this year, and OUTA believes the retailers have scored handsomely with average annual increases of 13% per annum for the past 14 years. If any increase is granted to the retail margin, this should be contained to below inflation, to offset the unreasonable increases extended to the petrol retail industry over the years,” concluded Duvenhage.

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