Sharp spike in fuel under-recoveries piles pressure on State finances

A sharp spike in fuel under-recoveries is piling pressure on government finances, raising questions about how long the State can keep cushioning consumers from steep fuel price hikes.

New figures from the Central Energy Fund show diesel under-recoveries nearing R10 per litre and petrol more than R3, while illuminating paraffin is set for a potential R7.58 per litre increase in May.

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The projected hikes come just weeks after the National Treasury temporarily cut the general fuel levy by R3 per litre for April to shield consumers as global oil markets remain volatile due to geopolitical tensions in the Middle East.

The lead economist at KPMG, Frank Blackmore, has warned that further intervention is narrowing, with the risk that the full impact of rising fuel costs will soon be passed on.

“Producers and industry rely on diesel in their cost structures, and those costs will be passed through to consumers. So, anything that needs transport will become more expensive.”

Blackmore said motorists will also feel the increases at the pumps.

“That would push the price of petrol significantly higher than where we started, while diesel could exceed the R30 per litre mark, adding to inflationary pressure.”