Massive fuel price hike and possible shortages ahead, warns AA

The Automobile Association (AA) has called on South Africans to limit all non-essential travel as road transport comes under pressure from unrest and the spectre of fuel shortages. The association also warned that unaudited mid-month fuel price data from the Central Energy Fund reflected a risk of substantial fuel price hikes at month-end.

“Fuel prices were already trending higher before the widespread looting and unrest of the past few days. But now, the daily rand/US dollar exchange rate has spiked from R14.35 to nearly R14.80 since June 12. SA imports a lot of fuel, which will inevitably cost more in rand terms. Meanwhile, international oil prices remain on the advance, adding further pressure,” it said.

The mid-month data indicates that petrol is set for an increase of 87c/l, diesel 58c and illuminating paraffin 56c, and the AA says it expects little respite before month-end. The association notes that while the supply of fuel will not push the prices of fuels higher, the weakening rand as a result of the riots will play a major role as the exchange rate is a key indicator for the local fuel price.

In a related development, SA Petroleum Refiners (Sapref), which runs a massive refinery complex in Durban supplying 35% of SA’s refined fuel, has declared force majeure.

“Sapref's declaration of force majeure means that events beyond its control — the recent lawlessness — has forced it to shut down the refinery,” the association explained.

The AA warned that if an operational refinery were to be overrun by criminals, surrounding areas would be at great risk.

“Past disasters involving refineries have polluted wide areas and claimed hundreds of lives, so Sapref's caution is justified. If the shutdown were to be protracted though, it could impact considerably on fuel supply to many areas, including Gauteng and other northern provinces inland,” it adds.

The AA advised motorists to avoid unnecessary journeys and to buy no more fuel than necessary, to preserve current stocks for essential and emergency services.

“We also advise citizens to work remotely where possible, and our plea to business is to accommodate the difficulties their staff may face if mass transit is affected by fuel shortages.”

The AA added that needless rand weakness driven by the government’s ineffective response to the crisis would hit vulnerable citizens first and hardest.

“People who use paraffin for heating, lighting and cooking are rarely in a financial position to absorb large price hikes,” the association said.