Government aims for fuel price relief for April and May
Envisaged move to cushion consumers from increase in transport costs caused by Russian invasion of Ukraine
Finance minister Enoch Godongwana has given the undertaking that temporary measures to mitigate the high fuel price focused on the months of April and May will be announced in the next few weeks.
The matter was being given urgent attention by government and was made more urgent by the impact of the Russia/Ukraine war on the oil price, he said in the National Assembly on Wednesday during a question-and-answer session with the economic cluster ministers.
Godongwana said several engagements had been held between himself and mineral resources & energy minister Gwede Mantashe and their departments on the fuel price.
“I can’t reveal details at this stage; we are in a sensitive discussion with the department of mineral resources & energy,” Godongwana said.
Mantashe previously indicated that a temporary suspension of taxes and the fuel levy was under consideration.
During the same session, Mantashe told MPs that government is considering using the country’s fuel reserves to cushion consumers from crippling fuel hikes. The reserves are maintained in case of emergencies brought about by disruption in global oil markets.
“We are looking into strategic fuel stocks because there is a crisis,” Mantashe said.
“Strategic stocks are by their nature an insurance that a country has to take in order to be able to respond to catastrophic levels of the petroleum sector. In our view, the current conflict in Europe and the impact on crude oil is likely to lead to such a catastrophe if the conflict does not end soon,” Mantashe said.
“That’s why in the discussion with the minister of finance one of the things we did is to give a disclosure that we have 10-million barrels of oil in strategic stock. So whatever interventions are concluded, they will take into account that strategic stock. The department believes it is better to have a balance between crude oil stocks and finished product stocks. Unfortunately at this point in time we are sitting with a strategic stock of crude oil ... we do not have finished products,” Mantashe said.
Godongwana said a longer term review of all aspects of the fuel price would be undertaken to ensure that it was made competitive. This would include a look at the review of the fuel price undertaken by the department of mineral resources & energy in 2018.
“The mineral resources & energy department can immediately implement changes to the basic fuel price formula informed by the department’s review undertaken in 2018. In addition the department has agreed to a review of regulated margins,” said Godongwana.
He noted that about 70% of the fuel price was managed by the department of minerals & energy and 30% by Treasury.
To provide relief to consumers Godongwana announced in the February budget that there would be no increase in the fuel levy — at a cost to the fiscus of R3,5bn — and no increase in the Road Accident Fund levy.
In reply to another question, Godongwana said it was relatively difficult to quantify with precision the effect of the Russia/Ukraine war on economic growth in SA as the situation was still developing and there was a lot of uncertainty.
There would be indirect effects on financial flows in different countries and on inflation as well as a positive implications for commodity exports.