No one would have thought that in South Africa we would see the sharp increases in the fuel price we have experienced the past six months. One of the greatest price increases was midnight on 1 June.Oil has risen to the $114 per barrel mark, the rand is trading in the R16 range and the effect is a sky-rocketing price for fuel in South Africa.
It has an impact on every item that is transported to and across the country. There are still fewer ships plying the seas due to Covid-19 and there are constraints in the global logistics chains that not only articulate into delays, but into demand, which has an upward price-pressure effect.Now to the Perfect Storm.
With the oil price and rand value vis-à-vis the dollar being what they are, the fuel price for June increased: Petrol 93, increased R243 c per litre, Petrol 95: increase R233c per litre inland & R243 c per litre coastal. Diesel 0.05%, increase R110 c per litre and paraffin R156 c per litre. However, the “relief” offered by government to reduce the level of taxation on the price of fuel (by around R1,50 per litre) is due to fall away at the end of May.
Already, some transporters have closed due to Covid-19.
Financial pressures have remained on the increase, and the unrest continues to ferment, radically shown by the violent period in July 2021 when the whole logistics chain was attacked – trucks, depots, distribution centres, warehouses and retail stores.Uncontrolled fuel increases is the factor that can cause a collapse in the road freight logistics sector. Calls to reduce taxes on fuel or for this to be removed and collected elsewhere will not resolve the underlying issues, which are the basic price of oil – determined outside South Africa through supply and demand – and the rand to dollar exchange rate, determined by international financial view of South Africa.
Solutions to the (expensive) fuel crisis could be:
- An agreement between African states producing oil (or refined products) at a lower rate for African countries in the spirit of the Africa Continental Free Trade Agreement (AfCFTA) and to ensure African economies do not collapse.
- Concentration by Sasol to produce far more fuel (was its goal in the 1970s and 1980s, not to make South Africa independent of foreign oil?).
- The development and growth of the synthetic fuels industry in South Africa – from all sources.
- The development of electric transportation devices and supply.By this we would solve our transport energy consumption and demand challenges and create long-term and sustainable employment, moving away from reliance on fossil fuels.
– Gavin Kelly, chief executive officer of The Road Freight Association
