South African motorists can look forward to another reduction in fuel costs in October, based on mid-month data published by the Central Energy Fund (CEF).
We can thank a continued downtrend in international oil rates for this welcome development.
During the initial weeks of September, the price of Brent Crude oil dropped from $78.80 to a low of $69.19 before slightly recovering to $71.97.
The lower average cost for the black gold when compared to August contributed to an over-recovery in domestic fuel prices of between R1.08/litre and R1.17/litre for petrol, and between 98c/litre and R1.00/litre for diesel.
Further relief was brought by an appreciating rand/US dollar exchange rate.
The currencies swapped hands for an average of R18.0578/dollar on 29 August, falling to R17.9885/dollar by 12 September. This slashed a further 11-12c/litre from all local fuel prices.
Based on these inputs, fuel prices in South Africa next month are expected to be adjusted as follows:
- Petrol 93 – Decrease of R1.19 a litre
- Petrol 95 – Decrease of R1.28 a litre
- Diesel 0.05% – Decrease of R1.10 a litre
- Diesel 0.005% – Decrease of R1.11 a litre
It must be noted that these predictions are not the official changes that will be made by the Department of Energy in October, 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.
More relief on the horizon
The contraction in fuel prices in South Africa is expected to persist until the early month of 2025, as per FNB Senior Economist Koketso Mano.
Oil prices fell below $70/barrel this September for the first time since November 2021, driven by weaker-than-expected economic indicators out of the United States, subdued oil demand from China, and slowing global inflation.
Similarly, the successful establishment of the Government of National Unity has increased investor confidence in South Africa, in turn leading to a sustained strengthening of the rand.
In fact, the rand is one of only five emerging market currencies, out of 23, that was trading stronger than the dollar in 2024, Citadel Global’s Bianca Botes told BusinessTech.
Bar any controversies, the rand should retain its strength through the remainder of 2024 and hold its ground in the R17.80 to R18.30 range.
Should these market conditions play out as expected, petrol prices could fall below R20 per litre in the early part of 2025, said FNB’s Mano.
Conversely, the economist said that diesel prices may move in the opposite direction of their cleaner counterpart.
“Wholesale diesel prices, which are already at lower levels, should experience more upward pressure – especially as global economic activity starts to recover from the cost-of-living crisis,” said Mano.
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