Stay home to reduce fuel demand, says Mantashe’s department

Officials from the Department of Mineral and Petroleum Resources (DMPR) have proposed an astonishing, surface-level solution to concerns around the expected surge in fuel costs and looming supply constraints, calling on motorists to stay at home.

This comes ahead of an expected hike in petrol and diesel prices when fuel prices are adjusted next Wednesday (1 April), in the wake of Brent oil having spiralled to around $100 a barrel since the start of the Iran war.

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The soft call to work from home reads like the set-up seen during the Covid lockdowns.

But the practicality of it is easy to question when the industries that carry the economy – mining, manufacturing, agriculture, construction, retail, and logistics – cannot function on remote work.

The department, headed by Minister of Mineral and Petroleum Resources Gwede Mantashe, generally announces changes in fuel prices at the end of the month. The changes then take effect on the first Wednesday of the new month.

Time to ‘get crafty’

Robert Maake, director of the Fuel Pricing Mechanism at the DMPR, says that in the absence of state intervention – at the moment – consumers will need to get crafty on ways to lessen the blow of the higher prices.

“And then on the fuel saving tips, I just said that one of the tips or maybe recommendation[s] is working from home to reduce the demand and also to save on the cost.”

Maake says this is a suggestion and not an order.

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While possible interventions won’t be decided upon before the April changes, Maake says various government departments continue to meet daily to discuss the way forward, including talks to carefully weigh up options as pressure mounts for a coordinated response.

A relatively marginal increase in the general fuel levy also takes effect next Wednesday.

“We know there are other discussions taking place above our level, by our principals and so on. If there’s any decision taken, they will make the necessary announcement. At the moment, we haven’t been told of anything on any intervention,” Maake reiterates.

Instead, he recommends other means to get by for now.

Image: Fuels Industry Association of South Africa

Supply of oil via a key passage in the Gulf came to a standstill as geopolitical tensions in the Middle East reached boiling point.

In the three weeks of the US/Israel and Iran hostilities, oil prices have pushed up above the $110 per barrel mark.

At the same time, the rand briefly weakened above R17 against the dollar for the first time this year. It was trading at R16.84/$ at around 2pm on Wednesday (25 March).

The oil price and rand/dollar exchange rate are key components in South Africa’s fuel prices.

Early predictions by analysts have warned consumers to brace for an estimated R5 increase per litre of petrol and almost double that for a litre of diesel.

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Fuel hoarders

South African authorities and the Fuels Industry Association have urged the public not to panic-buy fuel, with assurances of stable supplies to meet the country’s demand.

Consignments for March and April were shipped before the escalation of the war.

The association says reports of some petrol stations running low on diesel are isolated to regions – including agricultural areas where farmers rely on diesel for operations.

It describes this as a function of logistics battling to keep up with increased deliveries to stockpilers.

Read: Fuel rationing sets in, some farmers battling supply shortages

To discourage motorists and businesses from bulk buying, some wholesalers have upped diesel prices before the April changes kick in.

Maake says panic-buying now will only defer the pain since it has a direct bearing on the self-adjusting slate levy mechanism.

“If you [suppliers] implement your own cost now to try and discourage people from filling up diesel and so on, the problem is that it will affect how we calculate the slate [levy] because the slate is calculated based on the number or the price reference number for diesel that the department has determined for the period,” he explained on Wednesday.

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“Now, if we implement it now before the adjustment, it means you’re going to be double-dipping because you are recovering your money now and next month that increase is passed through to motorists.

“So, we’ll discourage wholesalers not to increase the price of diesel before the adjustment.”

Read: ‘Sufficient’ jet fuel in Sasol’s drums to keep airlines running

DA pitches ‘fuel levy pause plan’

The Democratic Alliance (DA), the second-largest party in the government of national unity, says it is willing to work with Finance Minister Enoch Godongwana to urgently reduce both the Road Accident Fund (RAF) Levy and the General Fuel Levy by 50% for the duration of the oil price shock, or as long as possible.

“Combined, the two levies contribute R6.35 to the overall price of fuel. A 50% reduction would dampen increases by R3.17 and provide immediate and essential relief to South Africans who are staring down the barrel of a massive petrol shock in a week’s time,” says the party’s Mark Burke.

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He acknowledges that such a pause in levies would affect tax revenue as well as RAF funding, to the tune of around R6.5 billion a month.

“This is not insignificant, but the shock of not doing anything to protect South Africa’s fragile economy is likely far larger.

“Sharp petrol price increases will hurt GDP, increase inflation, and cripple household budgets.”

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