Pump price adds to administered cost pressure

May’s pump price increase of 28c/l for petrol and 8,4c/l for diesel will escalate the agriculture industry’s fuel bill by R84 million a year.

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The petrol pump price in Gauteng’s main inland commercial region increased by 28c or 2,3% a litre on 2 May, pushing the price of 95 grade petrol to R12,22/l from R11,94 in April. The wholesale price of diesel will rise by about 0,9% to R10,98/l.
“Farmers’ diesel price will rise by 8,4c/l.

This means that the agricultural industry will spend another R84 million a year on fuel. Fortunately diesel has not increased to the same extent as petrol, but given the increases in other sectors this year, such as electricity and wages, it is quite significant. Administered prices are having more and more of an effect on farmers,” said Agri SA’s chief economist Dawie Maree.

While there is nothing one can do about rising fuel prices, Maree said farmers would look into more fuel-friendly practices. “When it comes to purchasing tractors and implements, farmers will select those that are more fuel efficient. Energy costs will push farmers into more efficient farming practices.” Since the beginning of the year, the inland diesel price has increased by 70,68c/l (6,9%) while the coastal price of diesel has increased by 66c/l (6,6%), Maree said.

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The weakening of the rand against the US dollar for the period 30 March to 24 April, to R7,85/US$ compared to R7,61/US$, was one of the factors contributing to the price increase. “The weaker rand has driven the fuel price up this month,” said Josina Solomons, commodity analyst at Rand Merchant Bank. “The weaker rand has offset the low oil price over the past month, which fell 3% to about $119/barrel.

We are of the view that if the oil price falls to about $117/barrel and the rand strengthens to about R7,65/US$ we could see a petrol price cut in June.” Solomons said the last petrol price cut was 5c/l in January, which followed an 11c/l cut in December 2011.