The latest calculations by the Central Energy Fund (CEF) show that petrol prices in South Africa are set to drop by a maximum of 24 cents per litre this Wednesday, 5 July, while diesel prices could rise by as much as 18 cents per litre.
These predictions are based on exchange rates between the local currency and the United States (US) dollar, as well as changes in international petroleum product prices.
The appreciating rand that went from an average of around R19.40/dollar at the start of June to R18.66/dollar by the 29th has assisted in shaving off approximately 19 cents per litre from each fuel type, whereas increases in international product prices have tacked on 3c/litre to petrol 95 and between 31-37c/litre to diesel – being the biggest driver behind the divergence in the anticipated price changes.
According to the CEF, fuel prices in South Africa this Wednesday are expected to be adjusted as follows:
- Petrol 93 – Decrease of 24 cents a litre
- Petrol 95 – Decrease of 17 cents a litre
- Diesel 0.05% – Increase of 18 cents a litre
- Diesel 0.005% – Increase of 12 cents a litre
The CEF stresses that these numbers are predictions and not the official changes that will be made by the Department of Energy, which could be a few cents higher or lower as they also take into account any changes in the Slate Levy, taxes, transport costs, or wholesale and retail margins.
What’s the deal with diesel
The rise in the international price of diesel comes off the back of increasing demand for this particular fuel type as it’s the main propellant used in commercial and domestic applications.
With worries of recessions dying down and economic activity picking up once more, coupled with limited supply coming from Russia and the USA, diesel is wanted by many industry participants which is pushing up its value.
According to Shore Capital analyst Craig Howie, “There’s been an increase in trucking activities, stretching demand; concerns over exports to Europe from Russia; shutdowns in the US; and lower refinery runs in China,” reported The Guardian.
“From an oil perspective, China has been a concern. Tough restrictions on movement have hit demand, but lockdowns have also reduced some refining capacity, too.”
In addition, the Russia-Ukraine war has seen Russian-made diesel all but disappear from the market in many Western economies, subsequently pushing demand onto smaller diesel refineries in other countries that don’t normally have to produce as much, which in turn elevates the price.
Fuel reserves around the world are now also much lower than they were before the Covid-19 pandemic and European conflict, meaning governments have fewer resources to cushion the impacts of unpredictable market fluctuations.
“The US Energy Information Administration estimates that stocks of US distillates – typically diesel and petrol – fell 8% in March to 24% below the five-year average,” said Howie.
Against the backdrop of higher demand and lower production, diesel is looking to start an uptrend once more.
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