Petrol and diesel expected to see a huge price drop in January

South Africa is expected to see a considerable drop in both diesel and petrol prices on the first Wednesday of 2023, with costs anticipated to go down by as much as R3.52 per litre.

The current estimation is that fuel prices will come down owing to a corresponding drop in global oil prices and a relatively stronger rand working in consumer’s favours, reports BusinessTech.

The latest forecast from the Central Energy Fund (CEF), covering the week ending 9 December 2022, suggests that the following fuel prices changes will occur in the first month of next year:

• Petrol 93 – Decrease of R1.53 per litre
• Petrol 95 – Decrease of R1.53 per litre
• Diesel 0.05% – Decrease of R3.46 per litre
• Diesel 0.005% – Decrease of R3.52 per litre

However, keep in mind that the official price adjustments will take into account the entire month’s data, such as any changes in retail margins and the Slate Levy, and could therefore change significantly before year-end.

Factors affecting the price of fuel

The current fuel price projections are based on the drop in international prices for petroleum, which are guided by global oil movements.

Oil prices have continued to drop substantially, with a barrel of bent crude now costing $76 compared to $87 in November.

There are a few reasons for the lowered costs, such as a $60-a-barrel price cap recently imposed by the European Union and G7 to punish Russian crude following the country’s invasion of Ukraine, as well as another zero-tolerance Covid policy in China which has led to several major economic zones shutting down.

While demand is expected to pick up again as China moves away from its zero-Covid policies, the expectation is that this will not have too much of an impact on current fuel price projections.

In South Africa, another reason for the improved prices is attributed to a more favourable Rand/US Dollar exchange rate, where the rand was trading below R17 to the dollar in the last two weeks.

Be that as it may, the news that President Cyril Ramaphosa may resign caused a great deal of speculation which led to the rand dropping in value again, though it is still currently doing much better than the R18.50/dollar ratio it held earlier this year.