Brace for pain at the pumps amid trade wars and carbon tax

South African transporters should brace themselves for a fuel price increase of up to 37 cents per litre – driven by the US/China trade war, sanctions against Iran and next month’s implementation of the carbon tax.

Although oil prices had dropped, a recent drone attack on a Saudi pipeline as well as recently imposed sanctions by the United States (US) on Iran, could see oil prices escalating. And, as an importer of oil products, South Africa is already sensitive to changes in the international oil price, according to local economists.

Furthermore, the ever-escalating trade war between China and the US will not only see volatility in global oil prices but in the exchange rate.  “Weaker currency exchange rates make a nett increase of fuel more likely,” said chief economist at the Efficient Group, Dawie Roodt

 “If the rand continues to slide against the US dollar and a shortage of crude drives up prices, the result could be too horrible to contemplate,” he added.

Current data suggests that the fuel price could rise by 28 cents per litre in June. This, combined with the introduction of the carbon tax next month – which also affects liquid fuels – could see an extra 9-13 cents per litre added to the fuel price, bringing the total increase to a minimum 37 cents per litre according to the Automobile Association (AA).

"Our hope is that the new government will immediately set out its policy agenda which has a direct impact on fuel prices," said an AA spokesperson.

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