Forecasts indicate that the price of diesel could increase by about R10 per litre next month if the war in the Middle East continues. An analyst says this will place unprecedented pressure on South Africans, but there are additional hidden costs that are causing even greater concern.
By Alani Janeke, senior journalist at African Farming and Landbouweekblad
The uncertainty created by the war involving the United States and Israel against Iran, and its impact on the international economy, oil prices and ultimately local fuel prices, has unintended consequences that worry Dr Ernst van Biljon, senior lecturer in supply chain management at the IMM Graduate School in Johannesburg.
“The problem of rising costs is not caused only by the rand–dollar exchange rate, international oil prices and the resulting higher fuel costs, but also by the reaction of supply chains to the uncertainty created by this situation. This is similar to the panic buying and stockpiling seen at the start of the lockdowns during the Covid-19 pandemic.”
Van Biljon says the pressure higher fuel prices place on the logistics chain can lead stakeholders, for example in the food value chain, to order larger quantities of stock to ensure availability. This results in higher storage costs, and these costs are ultimately passed on to consumers.
“All of these are costs that are not quantified. Meanwhile, the pressure on farmers and consumers simply keeps increasing as they have to absorb rising costs.”
Also read: Fuel crisis: Farmers give expert tips to cut fuel costs
A Possible R10 per Litre Increase?
The daily report from the Department of Mineral Resources and Energy indicates that the average under-recovery in the diesel price from 27 March to 13 April this year was R9,61 per litre for diesel with 0,05% sulphur, and R9,64 per litre for diesel with 0,005% sulphur.
For the same period, the under-recovery for petrol stood at R2,65 per litre for 93-octane and R3,03 per litre for 95-octane.
These figures reflect the type of price increases that could be expected, based on data from the period concerned.
Corné Louw, head of applied economics and member services at Grain SA, says they have received many enquiries from farmers over the past two weeks about exactly how fuel prices in the country are determined. “We are receiving less feedback about diesel shortages and more about price pressure.”
Representatives of cooperatives that African Farming spoke to said they were experiencing fewer problems with pressure on diesel supplies, which they attributed to a decline in panic buying. They reported, however, that severe pressure was being felt because of very high prices.
In the meantime, private diesel buyers are preparing for a purchase price that could increase by as much as R10 per litre in May.
Pierre van Eeden, the owner of a FUELit service station in Kroonstad, says suppliers he contacted about purchases around the middle of the month had already increased their selling price by a further R2 per litre.
“Over the past two weeks we have also seen consumer resistance to diesel purchases.”
Also read:
Free State Agriculture warns against diesel price manipulation amid global fuel tensions
Fuel crisis threatens South Africa’s citrus export season
