Big jump in petrol prices expected for December – but there’s some good news for diesel
The latest weekly estimates from the Central Energy Fund (CEF) point to petrol paid for motorists in December – but there are currently some bright spots in view for diesel following months of steep hikes.
According to the CEF’s weekly data to 11 November 2022, petrol prices are currently showing an under-recovery (thus a potential increase) of around R1.20 per litre for December.
Diesel prices, meanwhile, could show a slight drop of between 2 cents to 6 cents per litre.
The department stresses that the snapshot is not predictive but rather serves as a fuel price indication. As market conditions change throughout the month, so too do the forecasts.
These are the projected price adjustments at the end of week two of November.
- Petrol 93/95: increase of R1.20 per litre
- Diesel 0.05%: decrease of 6 cents per litre
- Diesel 0.005%: decrease of 2 cents per litre
- Paraffin: increase of 43 cents per litre
While the possible drop in diesel prices seems tiny compared to the R1.60 per litre hike seen over the last two months, the latest daily snapshot of fuel prices from the CEF shows an improving trend and that diesel could be dropping by 13 cents to 22 cents per litre in the new month if current market conditions continue.
The CEF’s more detailed breakdown of market fluctuations shows that the key driver behind the bleak forecast for petrol is the increasing cost of international petroleum products. A stronger rand has helped pull this back somewhat.
According to economists at the Bureau for Economic Research, last week’s lower-than-anticipated US consumer inflation print sent investors into a risk-on mode, which benefitted emerging market currencies like the rand.
US Treasury yields moved lower as investors revised down their expectations of where US interest rates could peak, with markets currently pricing in a 70% chance of a 50bps hike in December, which would break a streak of four 75bps hikes in the States.
Meanwhile, the dollar weakened significantly and fell to its weakest level against the euro since August.
“The rand benefitted from the weaker greenback too and gained 4% against the US currency last week and reached its strongest level since September,” the BER said.
Despite this bit of good fortune for the rand, oil prices – the other factor impacting local fuel prices – remain elevated, trading at around $96 a barrel. While this is still below the $100 mark, it is up from lows in recent months as demand and supply pressures continue to impact the market.
While the oil market is fluctuating – with prices dipping on Monday (14 November) following a rally last week – Bloomberg economists note that there could be a spike in demand coming from China, as the country appears to be loosening its grip on strict Covid-zero restrictions.
“An increase in Chinese crude consumption could lead to a further tightening of the market, which is facing European Union sanctions on Russian oil flows next month after the OPEC+ alliance initiated a round of supply cuts,” Bloomberg said.
The BER, meanwhile, noted that month-on-month figures show that inflationary pressures continue to persist in the market.
“Monthly price increases in energy commodities, such as fuel oil and gasoline, staged a comeback. After declining consistently since July, the CPI rate remained unchanged at 0.4% month on month in October,” it said.
Local economists have also warned that oil prices are building for a significant increase in prices at the pumps come December.
Petrol price adjustments will be announced at the end of the month, set to come into effect on Wednesday, 7 December.
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