Petrol price relief for South Africa in August
Petrol prices in South Africa are building for a nice cut in August, as oil markets and the rand continue to show resilience in the face of the US tariff headwinds.
Fuel price recoveries are standing firm despite the imminent imposition of the Trump administration’s trade tariffs next month, including on South Africa.
The latest data from the Central Energy Fund (CEF) shows that petrol price recoveries are still positive, lining the country up for a 22-26 cents per litre cut in prices in August.
This position has changed little from the start of the month, showing surprising resilience to the wider news cycle.
Unfortunately, this also holds true for diesel price recoveries, which are still in the negatives, with a sizeable 62 cents per litre hike on the cards for the new month.
- Petrol 93: decrease of 26 cents per litre
- Petrol 95: decrease of 22 cents per litre
- Diesel 0.05% (wholesale): increase of 63 cents per litre
- Diesel 0.005% (wholesale): increase of 62 cents per litre
- Illuminating paraffin: increase of 27 cents per litre
The pricing difference between petrol and diesel diverged in mid-June when Israel escalated the war in the Middle East by attacking Iran.
This resulted in a surge in global oil prices, which reached over $80 a barrel. While prices recovered in the weeks that followed, the war’s impact on petrol and diesel supply chains differed.
Other factors influencing divergent pricing between the different fuel types include supply and demand dynamics, such as diesel demand in industry or for heating, versus petrol for motor fuel.
At present, global diesel prices are trending higher due to supply concerns as US and European stocks run lower, and China pushes to boost industrial use.
The Wall Street Journal has also reported higher diesel prices arising from pressures to refining profit margins.
What else is pushing diesel prices up
According to Bloomberg’s analysis of the market, rising summer demand for diesel is also pushing up global oil prices in general, countering concerns of a supply glut.
Oil prices have trended higher since early May, with peak demand season starting solidly. However, analysts have questioned whether the strength can last.
A notable blow for diesel prices going forward is the European Union’s new agreement to lower the price cap for Russian crude as part of a package of sanctions on Moscow over its war against Ukraine.
The measures include curbs on fuels made from Russian petroleum, like diesel.
Bloomberg noted that, while the market is still digesting the package, there are concerns over the potential impact on diesel supplies, which could lead to higher crude prices.
“The sanctions package has lifted crude prices on the back of concerns about diesel supplies to Europe,” said Florence Schmit, a strategist at Rabobank in London.
“Strength in diesel has been keeping crude prices elevated for the last few weeks.”
Fortunately for petrol users, the heightened diesel prices are not affecting the fuel’s trajectory, with the contribution to basic fuel prices locally flattening out.
This is being supported by the rand sticking under R18/$ and even strengthening to around R17.70/$ on Friday.
The stronger rand is helping to add to the likely petrol price cut in August and cutting down the diesel price hike.
The rand’s resilience against the dollar is due to the greenback’s weakness, rather than any inherent strength in the local unit.
Looming trade tariffs of 30% against South Africa on 1 August will likely knock the rand, especially if the rate cannot be negotiated lower before then.
However, US consumers will ultimately suffer the fallout, with the dollar expected to come in even weaker as the economic impact of the Trump administration’s trade war plays out.
The Department of Petroleum and Mineral Resources will announce the official petrol price adjustments before they take effect on Wednesday 6 August.
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