South African diesel users are in for a rough time with an increase in fuel prices on the cards for next month.
This price increase is due to diesel producers enduring a supply squeeze in the United States and Europe created by the widespread closures of refineries in the northern hemisphere.
Many of the still-operational refineries also suffered from outages, further limiting the diesel supply.
According to South Africa’s Central Energy Fund (CEF), the expected fuel price adjustments next month will be as follows:
- Petrol 93 – decrease of 28c per litre
- Petrol 95 – decrease of 24c per litre
- Diesel 0.05% – increase of 66 cents per litre
- Diesel 0.005% – increase of 65 cents per litre
This follows the oil price coming under pressure as the United States progresses with its trade negotiations.
These negotiations have fortunately not resulted in increased tensions with China, the world’s second-largest economy, which is an encouraging sign for global trade and growth.
Additionally, the negotiations with the European Union (EU) are also making inroads, with them entering the second week of talks.
Despite these positive developments, there are still major concerns over the potential for 30% tariffs being imposed on EU exports to the United States as a concrete deal hasn’t yet been signed.
Besides the concerns over trade talks, the diesel price has also been impacted by the conflict between Israel and Iran, which has threatened millions of barrels of fuel exports from the Persian Gulf.
While this risk has receded somewhat, the supply remains constrained, with Bloomberg reporting that Saudi Arabia and Russia caused the biggest OPEC+ output cuts.
Summer heat waves could also pose a risk to diesel production and the North Atlantic hurricane season could likewise disrupt the US output of fuel.
Regardless of these factors, South African diesel motorists should brace themselves for a price increase next week.
Positive outlook
While the concerns about the diesel price are important, there are also causes for some positivity.
OPEC oil production has steadily been increasing, with the growth expected to exceed previous months next month, with improved refining margins helping plants run harder.
This increased production should help ease the fuel shortages and provide some relief for the diesel supply.
The Rand has also recently shown improved resilience against the Dollar, strengthening by 1.35% over the last month.
This improved exchange rate makes it cheaper to import fuel into the country.
There is further good news for petrol users as the petrol price is expected to drop next week thanks to the weaker oil price and stable Rand.
Regarding the decrease, 93 is forecast to drop by 28 cents per litre and 95 by 24 cents per litre.
While this is all good news, South Africans should remain alert and ready for potential price increases and not be caught off-guard.
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