Big petrol price drops confirmed for South Africa in June

Local motorists will be happy to know that prices for all fuel grades in South Africa are being reduced this Wednesday, 7 June.

Diesel prices are finally dropping to under R20/litre at inland rates, levels last seen in March 2022, whereas petrol prices are coming down to between R22-23/litre after cracking the R23 mark for the first time this year in May.

Additionally, the temporary 1.0c/l increase to the Carbon Levy in the price structures of both petrol and diesel that was approved by the minister of finance on 3 May is being removed when this month’s adjustments are made.

According to the DMRE, the official fuel price changes taking effect in June are as follows:

• Petrol 93 – Decrease of 71 cents a litre
• Petrol 95 – Decrease of 71 cents a litre
• Diesel 0.05% – Decrease of 84 cents a litre
• Diesel 0.005% – Decrease of 80 cents a litre

These alterations are largely a result of lower average international prices for oil in May when compared to April, which leads to a reduced basic fuel price for imported propellants.

On the downside, the Rand’s depreciation from R18.1331/US dollar in April to R18.9854/US dollar on 1 June had a negative impact on price changes, thus leading to a contribution to the basic prices of petrol and diesel by 54.58c/l and 50.88c/l, respectively, reported BusinessTech.

In line with the Self-Adjusting Slate Levy Mechanism, the Slate levy on fuels will, fortunately, remain at 0.00c/l with effect from 07 June 2023.

What to expect from petrol prices in the next 6 months

While prices for fuels in South Africa are coming down in June, from July onwards, the outlook becomes bleaker.

Rand Merchant Bank (RMB) anticipates that oil prices will start rising once more following the most recent drop, in response to strong demand from China as it ends its Covid-zero policies, weakness in the dollar, and tight supply following a mutual agreement among the oil-producing nations (OPEC) to cut production.

While RMB expects to see “something of a rand recovery” with a belief that the rand/dollar trading rate will end the year at R18.15 to the dollar, this won’t be enough to offset the negative effects of more expensive oil.

“The net result is expected to be small fuel price hikes in [the second half of 2023],” said John Cairns, RMB client strategist.

Fortunately, analysts from FNB Wealth and Investments said that while prices are most probably going to continue going skyward, they are unlikely to reach the all-time highs of over R26/litre we saw in 2022 partly due to a slowdown in global economic activity and a subsequent drop in demand for oil.

The table below shows how June’s fuel price adjustments will reflect at the pump: