Petrol prices in South Africa are looking to go down by a substantial amount come the first Wednesday of November, according to mid-month fuel price data released by the Central Energy Fund (CEF).
The current situation points to a possible drop in petrol prices of up to R1.93 per litre next month, and a maximum of 75 cents per litre for diesel.
These developments are attributed to a downtrend in the price of Brent Crude oil during the month of October, as the commodity ended September at an average of $94 per barrel and fell to around $90 per barrel by the 13th of October, resulting in an over-recovery of between R1.99-2.03 per litre for petrol, and 82-87 cents per litre for diesel.
On the downside, a noticeable rise in the average rand/US dollar exchange rate has had a negative impact on November’s expected fuel price adjustments.
At the end of September, the rand swapped hands at R18.80/dollar, rising to roughly R19.15/dollar at mid-October. This led to an under-recovery of 10 cents and 12 cents per litre for petrol and diesel, respectively.
According to the CEF, fuel prices in South Africa in November are expected to be adjusted as follows:
- Petrol 93 – Decrease of R1.89 a litre
- Petrol 95 – Decrease of R1.93 a litre
- Diesel 0.05% – Decrease of 75 cents a litre
- Diesel 0.005% – Decrease of 69 cents a litre
It must be noted that these predictions are not the official changes that will be made by the Department of Energy next month, which may be higher or lower as they also take into account any potential changes in the Slate Levy, taxes, transport costs, or wholesale and retail margins.
Oil prices to remain volatile
While the expected petrol price decreases for November are attributed to a friendlier oil price, things can change at a moment’s notice due to the recent eruption of what economists call the “Israel-Hamas war.”
This is because Iran, one of the world’s largest oil producers, risks being pulled into the conflict following allegations from the United States that it had a hand in setting up the war, BusinessTech reports.
If Israel decides to retaliate against Iran, there is a very real risk that it will severely impact oil supplies and drive up prices as a result.
RMB chief economist Isaah Mhlanga said: “A possible expansion of the war to the broader Middle East will drive energy prices higher, particularly oil prices. As an oil importer, the immediate impact on the South African economy will come through higher fuel prices and overall inflation.”
Similarly, Iran faces potential sanctions from the West if it is found that it did have a hand in planning Hamas’ attack on Israel, which will have the same effect on oil costs as when Russia was sanctioned for its invasion of Ukraine in 2022.
Mhlanga said these potential sanctions not only hold significant risks for oil, but also for the local and global economy.
“Iran is a major oil-producing country and one of the new members of the BRICS+ countries. The US has alleged that Iran was involved in the attack on Israel by Hamas. That allegation puts Iran on the firing line for more US sanctions that could be extended to any country that trades with it,” he said.
“This increases the risks to the global and South African economy from a geoeconomic, geostrategic and geopolitical perspective, with negative implications for the outlook for inflation, monetary policy and economic growth.”
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