Expect good things from petrol prices in South Africa this Wednesday

Prices for both petrol and diesel are set for welcome decreases in South Africa this Wednesday, 1 November.

The latest fuel-price data from the Central Energy Fund indicates that petrol price could fall by as much as R2.01 per litre, whereas diesel may see a drop of up to R1.08 per litre.

These decreases are largely a result of a recovery in international oil prices during the month of October, which sat at approximately $92 per barrel on 29 September and dropped to around $89 per barrel by 27 October, a result of rising stockpiles and a slump in demand.

Consequently, the welcome move in oil rates cut between R2.03 and R2.07 per litre from November’s expected petrol prices, and between R1.12 and R1.16 per litre from diesel’s expected prices.

The rand performed unfavourably against the US dollar during October, however, tacking on between 6-8 cents per litre to all grades of fuel.

According to the CEF, fuel prices in South Africa this Wednesday are expected to be adjusted as follows:

• Petrol 93 – Decrease of R1.96 a litre
• Petrol 95 – Decrease of R2.01 a litre
• Diesel 0.05% – Decrease of R1.08 a litre
• Diesel 0.005% – Decrease of R1.04 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.

Uncertainty lies ahead

While still high, the rand/US dollar exchange rate has shown a lick of stability over the past few months, with all eyes turning to oil costs being the main determinant in fuel price changes that may take place going forward, with this expected to be particularly volatile as the Israel-Hamas war wages on.

Oil prices shot up almost immediately following Israel’s official declaration of war on Palestine in early October for fears of the conflict spreading to other countries such as Iran, a major oil producer, which would hamper the availability of oil around the world.

These prices have somewhat recovered again over the past weeks off the back of a stronger US dollar and more clarity on the situation in the Middle East, however, they can rise again in the near term as Israel is currently preparing to invade the Gaza Strip by land.

This could spark engagement from Iran as the country warned Israel that “no one can guarantee control of the situation and the non-expansion of the conflicts” should it send troops to Gaza, The Times of Israel reported.

Should Iran get involved, it may result in sanctions on its oil by the United States as well as supply chain issues in the Middle East, which could have disastrous effects on international oil prices, as we saw in early 2022 when Russia invaded Ukraine.