Bad news for petrol prices this September

South Africa is facing petrol and diesel price hikes next month, and they are likely to get worse if the situation in the Middle East doesn’t improve soon.

New data from the Central Energy Fund (CEF), as of mid-August, points to a significant under-recovery for both fuel types, though diesel users will be hit particularly hard.

Petrol is currently looking at a price increase of between 74c and 85c per litre, while diesel is set for a hike of between R2.80 and R2.99 per litre.

This is a noticeable increase over the CEF’s projections from the end of last week, when petrol was facing a hike of 63c per litre while diesel was pegged for a R2.73 per litre hike.

The escalation in South Africa’s projected fuel prices is mainly attributed to the war in Iran, which shows no sign of reaching a peaceful solution over the short to medium term.

These are the CEF’s fuel price adjustment predictions as of mid-August:

• Petrol 93 – increase of R0.74 per litre
• Petrol 95 – increase of R0.85 per litre
• Diesel 0.05% (wholesale) – increase of R2.80 per litre
• Diesel 0.005% (wholesale) – increase of R2.99 per litre

Bear in mind these are not the official fuel price adjustments, which will only be confirmed by the Department of Mineral and Petroleum Resources in the first week of September.

Oil prices have risen for a fourth consecutive day as talks between the United States and Iran have collapsed.

At the start of the month, Brent Crude oil prices fell to a relative low point of $79 per barrel, but this has since increased to around $92 per barrel.

While lower than the peak of $100 per barrel recorded in late July, the rising oil price has nevertheless had a negative impact on South Africa’s fuel price recoveries.

Ships passing through the Strait of Hormuz have been attacked. On Tuesday, the UK said a vessel was struck by a projectile, causing one casualty.

The risk has caused other ships to reconsider their options. On Wednesday, two Chinese supertankers made a U-turn, lowering prospects that traffic through the waterway will return to normal levels, according to a report by Bloomberg.

Iran and Oman are in talks about how to manage the Strait, including a possible toll fee for all vessels and the banning of ships associated with the US or its allies.

US President Donald Trump threatened to bomb Oman if it “gets in the way” of US-Iran negotiations. The US plans to ramp up economic pressure on Iran by maintaining a blockade on the nation’s ports.

The consequence of all of this is that the CEF has recorded an under-recovery in the international product price of petrol and diesel.

The basic fuel price of petrol is facing an under-recovery of between 86 and 97c per litre, while diesel has an under-recovery of between R2.97 and R3.17 per litre.

The silver lining is that the rand is holding its value against the US dollar, trading at R16.22 per USD and leading to a lower contribution to the basic fuel price of roughly 12c for petrol and 17c for diesel.

The following table shows how fuel prices will be affected in September, based on the current projections:

Petrol 93 price 31 July – 18 August

Petrol 95 price 31 July – 18 August

Diesel 0.05% price 31 July – 18 August

Diesel 0.005% price 31 July – 18 August