Government tries to help cushion petrol price increases

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As South Africans continue to feel the pinch of rising prices, the government has stepped in to help by extending the R1.50 reprieve on the general fuel levy. BUT this is a temporary measure to lessen the economic impact of a general R2.43 petrol price increase. 😕

Some background: The price of 93-grade petrol rose from R16.91 a litre on 1 June 2021 to a whopping R23.94 a year later – that’s an increase of more than 40%!

The record hikes are a consequence of an increase in the average price of Brent crude oil, which is sadly due to reasons largely out of our control:

🔹The sanctions imposed on Russia after it invaded Ukraine;

🔹Increases in demand for petrol during the summer months in the northern hemisphere;

🔹The increase in crude oil supply; and

🔹Various supply shocks were caused by the Covid-19 pandemic.

The problem with fuel price increases is that it affects everything from the cost of food and clothes, to transport. In an attempt to soften the blow, the government provided temporary relief through this R1.50 reduction on the general fuel levy back in April. This has now been extended until 6 July, after which it will be cut to R0.75 until 2 August, when it will be withdrawn entirely. 😓

The bottom line is that extending the relief measures will cost the government R4.5 billion in revenue. Although the relief had initially been funded through the sale of crude oil reserves from the Strategic Fuel Fund, the extension is still set to have an impact on SA’s national wallet. 

So, the government is buying itself time by providing relief, but it’s effectively an increase in government spending and will only provide relief until August, by which time South Africans will be spending well over R25 a litre. The search for a sustainable solution to the problem continues…

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