Dawie Maree, an economist at FNB, says one of the main contributors to the increase in fuel prices is the war in Ukraine. 

However, he says there are ways that government can help South Africans pay less at the pumps. 

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Maree says the conflict between Russia and Ukraine is one of the drivers of the current international oil price. Linked to this is an uptick in demand at international level for bent crude oil as China lifted some of its Covid-19 restrictions. The unrest in Libya also contributed to an uptick in the oil price.

Maree explains that this uptick in oil prices offsets the appreciation in the US Dollar exchange rate, which resulted in the under-recovery of fuel prices, which is the reason why we’ve seen another increase in fuel prices this week.

Suggestions of what government can do to help lower fuel prices

According to Maree, there are ways that government can help to alleviate the high fuel prices. “I think there’s a lot that [government] can do. If we look at the fuel price and the taxes that have been put on fuel prices, there’s definitely room for improvement or room for support.

“I think if you can have a proper review of the fuel price and the makeup of the fuel price, we can definitely put some positive measures in place to assist our consumers and our producers at this stage – especially with the view on inflation.”

Maree adds it must be taken into account that the fiscus is under pressure which means that government must make up for the lost revenue from a fuel levy perspective.

Is there anything farmers can do to cut costs?

“This is a difficult one because as a result of the ever-increasing fuel prices, most farmers either already moved to minimum tillage, or they invested in fuel-efficient implements and machinery.

“[A suggestion] is that they can improve on their profitability and also on their productivity, from a production point of view. “

Maree highlighted that producers, just like consumers, are price takers, which means that they cannot transfer the increases they experience on a direct level to someone else in the supply chain. This, as "they must bear the brunt of it."

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