The latest fuel price recovery data for mid-February shows that petrol and diesel prices are set to increase in March, with diesel users being hit particularly hard.
New data from Central Energy Fund shows that the under-recovery for diesel prices has deepened while petrol prices have also dipped into the negatives.
Petrol is now lined up for an increase of roughly 2c per litre next month, while diesel will experience a significantly larger hike of around 46c per litre.
These are the projected levels at the end of the second week:
- Petrol 93 – increase of 2 cents per litre
- Petrol 95 – increase of 3 cents per litre
- Diesel 0.05% (wholesale) – increase of 46 cents per litre
- Diesel 0.005% (wholesale) – increase of 48 cents per litre
This marks the end of a short-lived positive streak for petrol prices, which dropped by up to 66c per litre in January and 65c per litre in February.
The silver lining is that the 2c per litre increase is practically intangible, though its quite possible that prices will increase further by the end of the month.
For reference, February was initially expected to receive a R1.15 petrol price cut, which ultimately dropped to 65c, indicating that fuel prices are on a deteriorating trend.
The expected hikes for March are mainly attributed to a spike in global oil prices, ensuring that petroleum product rates are in the under-recovery zone.
Oil prices first began to rise in January amid several geopolitical events, such as the US intervention in Venezuela and the tense situation with Iran in the Middle East.
This offset the initially strong projected over-recovery for South Africa’s fuel prices, with diesel now deeply in the negatives at -66c per litre, while petrol went into the red at -19c per litre.
Thankfully, this has been somewhat mitigated by the rand’s strong performance against the US dollar, contributing to a 17c per litre over-recovery for both fuel types.
The rand has, mostly, maintained a solid position against the dollar this year, trading below R15.70/$ in January, increasing to above R16.40/$ in early February, and dropping back down to R16.04/dollar as of mid-February.
The rand actually improved to R15.87/$ prior to President Cyril Ramaphosa’s State of the Nation Address on Thursday 12 February, but dropped to the current figures following the address.
The real deciding factor will likely be the National Budget Speech, which is scheduled for 25 February.
A mixed outlook for fuel prices
While fuel prices are set to increase in March, the small margin means it’s still possible that South Africa could see a reduction in petrol costs if the global oil price improves.
Souring this positive outlook is the possibility of new tax measures in March and April that could raise the price of both fuel types considerably.
It is expected that Finance Minister Enoch Godongwana will announce potential increases to the nation’s fuel levies and other taxes as part of the upcoming budget Speech, which will likely come into effect in April.
Several economists have warned that, should the National Treasury wish to increase tax revenue, an increase to South Africa’s fuel levies is one of the easiest ways to do so.
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