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Fuel price increases set to continue, surpasses CPI

Fuel price increases set to continue, surpasses CPI

Photo by Duane Daws

4th April 2014

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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The price of fuel in South Africa has increased more than double the consumer price index (CPI) year-on-year and has cumulatively surpassed the index by 247% over the past 15 years, a White Paper by Eqstra Fleet Management has revealed.

The past decade-and-a-half had seen fuel prices jump more than 560%, equating to an average increase of 13% year on year, while the average CPI over the same period was 5.25%, said Eqstra MD Murray Price on Friday.

While the past five years had seen a “slight slowdown” to a 12% year-on-year increase, Eqstra, which conducted more than 50 detailed fleet reviews over the past six months, forecast a 15% rise in 2014/15.

The company expected a hike in petrol and diesel prices of 48c/ℓ and 54c/ℓ, respectively, during the first two quarters of 2014, bringing the fuel price closer to breaching the R15 mark mid-year, reaching about R15.50 by the end of 2014.

“With a predicted 15% increase in fuel for the 2014/15 year, it has become essential for fleet operating companies to ensure that the optimal fleet is being run. To do this, they must be stringent in managing driver behaviour and pay close attention to the vehicle fleet mix,” Price commented.

Currently, fuel accounted for between 38% and 44% of overall corporate fleet cost and more than 60% of companies were operating vehicle fleets “to one degree or another”.

However, fuel price forecasting was highly uncertain.

“When we analyse the yearly lows and highs in actual fuel pricing, there has been an actual difference of close on 16% between the lowest and highest prices a year during the past four years,” Price explained.

The average fleet vehicle consumed about 5 000 ℓ/y of fuel, which, at the start of 2013, equated to a yearly cost of R59 300. By the end of December, the same calculation resulted in a yearly cost of R67 750.

Further, fuel prices were significantly affected by petrol tax, which, since 2007, had been increasing steadily – a trend that was expected to continue.

“Finance Minister [Pravin Gordhan], in the March 2014 Budget, announced a 12c/ℓ fuel and 8c/ℓ diesel levy increase effective April 2, which will push the price of petrol closer to the R14.50/ℓ mark,’” said Price.

Carbon tax, which currently equated to 1c/km, was also expected to rise during 2014.

“Indications in the Budget Speech are that taxation will be reviewed upwards to motivate better buying behaviour,” Price explained.

Edited by Creamer Media Reporter

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