R2 per litre blow for petrol prices in South Africa

Another massive petrol and diesel price hike is on the cards for South Africa this October.

This is according to early data from the Central Energy Fund (CEF) for September, which shows that petrol and diesel are currently on track for a significant under-recovery.

Petrol is looking at a hike of roughly R2 per litre, while diesel is set to go up by more than R2.50 per litre, pushing wholesale prices well past the R30 per litre mark.

This comes only a day after the official fuel price adjustments came into effect for September, with petrol and diesel increasing by R1.34 and R3.15 per litre, respectively.

Petrol 95 is currently sitting at a retail price of R26.92 per litre at inland rates, while the wholesale price of diesel 0.005% has reached R30.05 per litre.

These hikes are predicated on the unstable situation in the Middle East, where the United States and Iran have begun to trade blows again for the first time in roughly a month.

These are the CEF’s latest fuel price adjustment predictions as of the first week of September:

• Petrol 93 – increase of R1.96 per litre
• Petrol 95 – increase of R2.08 per litre
• Diesel 0.05% (wholesale) – increase of R2.47 per litre
• Diesel 0.005% (wholesale) – increase of R2.69 per litre

Bear in mind that, since it is still early in the month, prices will continue to fluctuate due to international factors; however, this data still gives an indication that fuel prices are on an upward trajectory.

This is mainly due to the high price of oil, as Brent Crude is currently trading for roughly $95 per barrel.

Oil prices have risen considerably since the start of August, when Brent was selling for $79 per barrel. Prices peaked at $94 per barrel on 24 August and then fell to $86 per barrel.

Unfortunately, prices have risen once again due to the escalating situation in the Middle East. The United States launched strikes against key targets in Iran, while Tehran retaliated by attacking US allies in the region.

Neither side has shown a willingness to come to the negotiating table since the interim peace agreement fell through in June. The result is that crude oil prices are 50% higher than they were at the start of the year.

There are also signs that the conflict will be prolonged even further, as the US is extending its troop deployment to maintain a presence of 50,000 personnel.

Because of this, the CEF shows that the international product price of petrol is set for an under-recovery of between R2.06 and R2.18 per litre. Diesel is also in the red at R2.60 to R2.82 per litre.

One small measure of relief is the rand/US dollar exchange rate, which has improved to just over R16 per USD.

As a result, the Basic Fuel Price will experience a small over-recovery of around 10c per litre for petrol, and 13c per litre for diesel, based on the exchange rate.

The following table shows how fuel prices will be affected in October, based on the current projections: