November 24, 2017

EQSTRA FLEET MANAGEMENT PREDICTS 10% FUEL PRICE INCREASE IN 2016

 

The new fuel prices, which came into effect on 6 April, represent a fuel price hike of 7.5% with   reef petrol 95 increasing by 88c/litre and the wholesale price of diesel increasing by 98c/litre.  Although South Africans have enjoyed two petrol price decreases in January and March 2016, the overall increase since January is 53 c/litre for petrol and 48 c/litre for diesel.

The main reasons for this increase are:

  • The increase in fuel levies
  • Increased transport costs – in Gauteng transport costs will increase by 5.2 c/litre due to the pipeline tariff increase and the road transportation tariff increase
  • The average increase in the price of petroleum products on the international market – 52c/litre for petrol and 61 c/litre for diesel.

The South African fuel price is based on

  1. The Basic Fuel price – what it would cost a South African importer to purchase crude oilhttp://www.eqstrafleet.co.za on the international market and to transport it onto South African shores
  2. Domestic elements, which include different pricing zones, domestic transport costs, government import taxes and levies and retail and wholesale margins which are added to the international price
  3. The rand/dollar exchange rate.

One of the key pricing elements remains the strength of the Rand – with forecasts for the South African Rand showing a continuing weakening again the US Dollar. The average South African Rand/US Dollar rate over the past 12 months was R 13.80 but the current exchange rate, as at the 04 April 2016 is R14.67 (the average rate over the last 5 years (April 2011 – April 2016) was only R 10.18.)

In addition, and according to the World Bank, the price of Brent crude oil is forecast to reach $ 88.3 by 2025. (Bank, 2015).  As a result, it is expected that local petrol prices will experience an upward trend for years to come.

Based on the above, Eqstra predicts that the increase in the fuel price in 2016 will be in the region of 9 – 10%.

To place this in context, the average fleet vehicle consumes approximately 5,000 litres per annum. With the April 2016 fuel price of R 12.62, this will equate to an annual cost of R63 100 per vehicle per annum. A 9% increase will result in an annual increase of +/- R5 679 while a 10% increase will result in an annual fuel increase per vehicle of +/- R6 310.

“Fuel contributes between 42% and 48% of overall corporate fleet expenditure,” emphasized Murray Price, managing director of Eqstra Fleet Management.  “As such, it is the single biggest cost to fleet controllers, and thus it becomes increasingly important for fleet operators to better manage driver behaviour and to choose the correct vehicle for the job.”

“In view of this, we believe it is essential for fleet operators to budget for a 9 – 12% increase in the next 12 months,” Price concluded.

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