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Friday / 24 May 2024
HomeNewsFrom bad to worse for petrol prices in South Africa next month

From bad to worse for petrol prices in South Africa next month

Fuel prices in South Africa are set for another massive jump in March following an already sizeable increase of up to 75c per litre in February.

Mid-month data published by the Central Energy Fund currently shows that the prices of both petrol and diesel are primed to soar by another R1.32 per litre minimum come the first Wednesday of next month.

This will push the cost of petrol to well over R24 per litre and diesel to nearly R23 per litre.

These anticipated hikes largely come off the back of rapidly rising international oil prices during the first few weeks of February.

A barrel of Brent Crude oil traded around $78.70 on the first day of the month but now goes for a far higher $81, leading to an under-recovery in local fuel prices of R1.20-1.23 per litre for petrol and R1.29-1.44 per litre for diesel.

During the same period, the rand underperformed against the US dollar moving from an average of R18.77/dollar on 1 February to R19.16/dollar by the 14th.

This has tacked on another 12-13c per litre to the expected price adjustments for March, depending on the type of propellant.

According to the above market factors, fuel prices in South Africa in March are expected to be adjusted as follows:

  • Petrol 93 – Increase of R1.32 a litre
  • Petrol 95 – Increase of R1.36 a litre
  • Diesel 0.05% – Increase of R1.43 a litre
  • Diesel 0.005% – Increase of R1.58 a litre

It must be noted that these predictions are not the official changes that will be made by the Department of Energy next month, 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.

Light at the end of the tunnel

While it seems that fuel prices are in a never-ending upward spiral, it is anticipated that the continued increases will give way to price decreases the further we go into the year.

Johann Els, Old Mutual Group Chief Economist, said the company is expecting to see lower inflation and interest rates later in 2024, which should see fuel prices gradually start declining accordingly.

At present, the high price levels are supported by conflict in the Middle East that has hampered shipments of Brent Crude oil throughout the world, coupled with freezing temperatures in the USA that similarly had a negative impact on the production of WTI Crude.

These elements will remain important in 2024, however, Els said there should be a slowdown in the global economy and consequently lower oil demand, which will lead to reduced costs.

Furthermore, it is expected that the United States will cut interest rates this year with the dollar to remain stable, perhaps even devalue, which will create an environment in which the rand can regain purchasing power.

“The combination of a stable to slightly stronger rand, and stable to slightly lower oil prices, should mean that we should look forward to lower petrol prices during the course of this year,” said Els.

“Perhaps not significantly lower, but lower nonetheless, and that will feed through into that lower inflation that we expect… which will allow for lower interest rates.”

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