The Department of Energy’s Central Energy Fund has published mid-month data on the movement of the fuel price, showing how much motorists are likely to pay in September.
Cash strapped consumers can expect an additional hike in fuel prices in September, with diesel prices reversing the small reprieve granted in August.
The country has seen a petrol price hike for six months out of eight so far in 2019, while diesel has been up for seven months.
At mid-month, the CEF shows the price of 95 grade petrol increasing by 10 cents per litre, while diesel looks set to rise by around 15 cents per litre.
For 93 grade petrol could see a slight decrease of 2 cents per litre, due to a greater benefit (of around 10 cents per litre) from movements in international petroleum prices.
The main drivers behind the fuel price changes are changes in the international cost of petroleum products (mainly influenced by international oil prices) and the changes in the rand/dollar exchange rate.
So far in August, international petroleum price changes have worked in the country’s favour, contributing to a 34 cents to 45 cents per litre drop in prices. However, this has been almost completely undone by the weakening of the rand, which has contributed to a 43 cents to 47 cents per litre increase in prices.
Oil price changes
International product prices have increased slightly in August, but remain lower than at the end of July.
Crude oil prices have hovered around the $60 a barrel level for most of the month, fluctuating around various news topics – most notably the US/China trade war being pushed by US president Donald Trump.
The value of crude has slumped almost 20% since April and has traded as low as $57 a barrel in recent sessions.
News of tariff increases being pushed by Trump on China being delayed have led to a rally in prices, but higher prices would need to be sustained over a longer period for this to start having a negative impact on local fuel prices.
According to PwC chief economist Lullu Krugel, for every $1 movement in international oil prices, there is a 25 cents impact on the local petrol price in the same direction.
Rand/dollar exchange rate
The rand has weakened significantly in August, helped by international events, but exacerbated by local politics and warnings over the economy.
US president Trump’s trade war with China continues to lead as the main influence on the exchange rate, with news of the influential president postponing the 10% tariff hike on certain Chinese goods to December, helping the rand recover some of its losses in previous sessions.
The tariffs were initially due to kick in on 1 September, which sent investors fleeing from riskier assets, such as those in emerging economies like South Africa.
“The rand now has the potential to gain some upward momentum but we will be keeping a very close eye on the geopolitical landscape,” said Bianca Botes, treasury partner at Peregrine Treasury Solutions.
Locally, South Africa’s economy has been kept under pressure by talk of a credit downgrade from Moody’s, while negative sentiment persists around low economic growth, high unemployment, bankrupt SOEs and political infighting.
Here is how fuel prices could change:
|Fuel (Inland)||August Official||September Expected|
|0.05% Diesel (wholesale)||R14.33||R14.48|