Energy

Petrol vs diesel prices in South Africa: 2006 – 2016

Staff Writer

 ·24 Aug 2016

With news around finance minister Pravin Gordhan undoing recent gains made by the rand, hopes for a sizeable drop in the petrol price in September now look unlikely.

Daily data put out by the Central Energy Fund in the middle of the month showed that motorists could expect yet another substantial drop the fuel price in September.

However, mid-month estimates of a drop of around 90 cents per litre has been dashed by a fresh decline in the value of the rand, which has dropped by almost 5% over the past 24 hours thanks to renewed concerns around the fate of Gordhan.

Data published by the CEF on Tuesday (23 August) put the likely petrol price drop at around 40 cents per litre, while diesel was expected to drop by 66 cents a litre. These values applied at an exchange rate of R13.48 to the dollar.

With the current exchange rate at R14.12 to the dollar – any expected drop will now be much lower.

Historically, diesel has mostly been cheaper than petrol in South Africa, though this has not always been the case, and not a trend seen around the world.

One of the key differences in the pricing of diesel versus petrol, is that diesel prices reflect wholesale prices, not the price you would pay at the pumps.

The retail price of diesel varies from station to station, depending on the margins applied by each retailer.

For example, the wholesale inland diesel price for August was at R10.96 at the beginning of the month, while Caltex’s retail version – Caltex 50 diesel with Techron – sells at R11.33 per litre.

Over the past decade, both the petrol and diesel prices have seen some significant fluctuations, but petrol (95 grade) has seen the biggest overall increase, having jumped 75.4% since 2006.

The graph and table below show how the prices have changed year-on-year, between August 2006 and August 2016.

Source: Department of Energy; Inland prices, August

The fuel price is affected by two major components: the global oil price, and the currency exchange rate between the rand and the dollar.

Between 2014 and 2016, fuel prices (both diesel and petrol) have shown a year-on-year decline, boosted by a much lower global oil price, which has dropped below $50 a barrel, with little hope that it will balloon past that level in the near future.

However, much of the benefit delivered by lower oil prices has been undone by weakness in the rand – brought about by a struggling economy, poor growth policies and a number of political scandals involving president Jacob Zuma.

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