Slight relief as fuel prices fall

With effect from midnight on Wednesday consumers now pay R6.58 per litre of petrol, down from a hugely contentious R6.96 per litre.

The move has been widely welcomed by consumers and business operators, who had raised grave concerns over continuously rising prices that were pushing up transport costs.

Automobile Association president Gary Ronald said the price decrease had been inspired by the fall in international oil prices, which have dropped $9 since the end of the Middle East crisis.

The South African Petroleum Industry Association said the international price of crude oil had fallen to $69 a barrel from an all-time high $78 per barrel in July.

The higher price had been inspired by the ravaging Middle East crisis that had created severe shortages in the international market for oil.

However, expectations are high that the latest thaw in prices could begin a new trend towards falling prices in coming months, triggered by renewed supply by Middle East states.

Ronald said there were high hopes that the decline in fuel prices would be passed on to consumers business owners, who were being weighed down by the heavy cost of transportation.

“Motorists will pay less for petrol because international prices of petroleum products have come down.

“We are however hoping the reduction will be passed on to commuters, because taxi fares have also gone up,” Ronald said last week.

Taxi operators in some areas hiked fares by as much as R1.50 two weeks ago, citing the persistent rise in fuel prices as the major reason for the increase.

But the move was not well received by some commuters, who vehemently protested against the fare increase.

Over 1 000 commuters in Chatsworth (near Durban, Kwa Zulu Natal) reportedly burnt tires and forcefully detained taxis at Ebhodini Taxi Rank in Welbedacht last Monday after the taxi operators had effected a $1.50 increase in fares.

The commuters said they were engaging in an “economic protest” against the increase in taxi fares from R7 to R8.50 and R6 to R7.50 respectively ‘ the second hike in as many months.

They said the continued increases would make it difficult for them to survive, as they needed to cater for themselves and children travelling to schools in surrounding areas.

But taxi operators say they need to constantly increase fares in order to match rapidly increasing fuel costs.

Klaarwater and St Wendolin’s Taxi Association secretary Themba Mdletshe said it was not clear at present whether fares would come down due to the decrease in fuel costs.

He said the association would wait to see whether the decline would remain constant.

Business operators have complained that the rising cost of fuel has made the cost of doing business in South Africa “very expensive” and this was likely to have a ripple effect on consumers.

In a statement issued recently the Durban Chamber of Commerce said providers of goods and services would be forced to increase prices of goods and services in order to keep up with the fuel price hikes.

The result was likely to be a worsening burden on already hard pressed consumers.

SADC countries have battled to maintain a reign on soaring fuel prices over the past two years, as fluctuations in international oil prices took their toll on the non oil producing region.

Most countries in the region are currently charging their highest ever prices for fuel, in an effort to keep up with trends in global oil prices.

Reports from Namibia this week said fuel prices were likely to drop also.

Namibia’s Minister of Mines and Energy, Erkki Nghimtina, told New Era the possible reduction in fuel prices would be good news for Namibian consumers who pay almost N$7.00 per petrol litre.

Given a potential easing of geopolitical threats in the Middle East, fuel prices are in the medium term likely to reduce by September. Some analysts have speculated that international oil prices are likely to moderate as oil demand is expected to decline.

“We will benefit if the price goes down. Things will then improve,” said Nghimtina.

Recently, Namibia announced its sixth fuel price hike that took effect on 17 August 2006. The last increase meant the retail price for lead replacement petrol (LRP), unleaded petrol (ULP) and the wholesale price for diesel went up by N$0,50 cents.

In Harare, New Ziana reported that the government has said it would not backtrack on the prices of fuel that it announced last month as they were reached after consultations with all stakeholders.

New Ziana said Energy and Power Development Minister, Mike Nyambuya said this while responding to a question during question and answer session.

“We have agreed that the price of fuel will be $ 320 for diesel and $ 335 for petrol and we will enforce that,” he said, adding the Ministry did not set prices unilaterally.

Nyambuya was responding to a question from Binga MP, Joel Gabhuza who wanted to know the cause of the confusion in the sector.

He said the price distortions obtaining in the fuel sector were a result of greedy dealers that wanted to maximise on profits without regard to costs of procuring the commodity.

It had been agreed that the price margins that were gazetted would enable the fuel dealers to survive, taking into full consideration the build up of costs in bringing the commodity into the country, he said.

These included the price of procuring, the foreign exchange rate and costs of shipping, Nyambuya said. The government last month fixed the price of fuel at $ 320 per litre for diesel and $335 per litre for petrol.

September 2006
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