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What to expect from petrol prices in South Africa over the next 12 months

Fuel prices in South Africa are in for a rocky ride over the next 12 months off the back of a consistently depreciating rand and uncertainty in the oil market, but the good news is that they shouldn’t go much higher than they did in 2023.

Research and consultancy group PwC projects that petrol prices should increase by an average of 1.6% and diesel prices by 0.3% by the end of 2024 in comparison to last year.

“These forecasts are based on the current value of oil price and rand futures in the financial markets, which frequently adjust based on real-time changes in commodity and currency markets,” said Dr. Christie Viljoen, Senior Economist at PwC South Africa.

“Nonetheless, the forecasts do show that weakening in the rand during 2024 will likely overshadow an expected decline in oil prices.”

Rand on a long-term depreciatory trend

Presently, the local currency is on a long-term depreciatory trend against the US dollar and a year-on-year weakening is often experienced when a currency exhibits these traits, said Viljoen.

Therefore, PwC anticipates that the rand/US dollar exchange rate will continue rising from its average of R18.50/dollar in 2023 to a mean of R19.00/dollar in 2024.

“From another perspective, the weak state of the local economy and the impact of developments in the Middle East on investor risk sentiment are both negative towards emerging market currencies like the rand,” said Viljoen.

This will be the main driving force behind rising prices at the pumps given that international oil costs are expected to see a slight drop throughout the year when taking into consideration the current geopolitical climate.

The wildcard

From an oil price perspective, the “wildcard” to pay attention to in 2024 would be the widening of conflict in the Middle East beyond the current geographies.

“In the oil market, a key factor will be developments in the Middle East and specifically the Red Sea where geopolitical tensions and conflict have already resulted in disruption to international supply chains,” said Viljoen.

Recent unrest in the Red Sea with pirates seizing control of cargo ships and oil tankers has forced others to take different, longer routes to safely get to their destinations.

“While so far the impact on the region’s oil production is muted, this could change quickly,” said the economist, which will disrupt and most likely push up global energy prices.

However, the international oil price in and of itself is not the main driver behind rising fuel prices in South Africa, rather it’s the rand-oil price.

The weaker the exchange rate, the more expensive it is to purchase the black gold from manufacturing nations. Consequently, should oil prices experience a decline in 2024 as predicted, a devalued rand could still counteract the positive effects this would have and result in higher fuel costs within our borders.


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