Two top analysts from FNB Wealth and Investments said the current uptrend in petrol prices in South Africa is anticipated to continue for the remainder of 2023.
In January, one litre of petrol 95 sold for R21.40 at inland rates. Since then, the fuel type has experienced four increases, the latest being a hike of 37 cents in May, and it now stands at a rate of R23.34 per litre.
Simultaneously, the price of diesel 0.005% has enjoyed three decreases and one increase from January to May, going from R21.42 to R20.50 per litre, respectively.
Silver lining to a dark cloud
The dark cloud predicted for petrol prices in 2023, fortunately, has a silver lining.
FNB’s analysts said that while prices look to keep pushing up, they should remain below the all-time highs of over R26 per litre that they reached in the midst of the Covid-19 lockdown and that volatility in international markets should keep the outlook fluid, according to a report by BusinessTech.
A rally up to this price point is unlikely due to weaker global economic activity and subsequent lower oil demand in April which painted a picture for the year to come.
While the oil-producing nations (OPEC+) have agreed to support prices through production cuts, these cuts have only caused prices to buoy and have not driven a kind of push that would test 2022 highs.
Diesel isn’t immune to fluctuations in commodity prices, however, FNB said the divergence between the prices of this fuel type and petrol is driven by a decelerating demand for diesel alongside a slowdown in global economic activity.
In addition to these factors, higher lending rates are also putting a damper on growth projections.
Both the US Federal Reserve and European Central Bank are expected to hike interest rates or take more drastic measures to reign in inflation this year, which could have a knock-on effect on the South African currency and therefore fuel prices, said FNB.
“Rising real rates in these advanced economies, while South Africa’s current account falls into deficit territory and local structural constraints mount, should continue to weigh on the rand and worsen local price pressures,” said the analysts.
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