Here is the expected petrol price for August

South African motorists can expect a significant fuel price hike in August, with mid-month data from the Central Energy Fund pointing to petrol and diesel price pain next month – even before factoring in the damage done by riots and looting in KwaZulu Natal and Gauteng.

The CEF data shows a large under-recovery for both petrol and diesel, with mid-month data pointing to an 83-87 cents per litre hike and a 57-58 cents per litre hike for petrol and diesel, respectively.

  • Petrol 95: increase of 87 cents per litre;
  • Petrol 93: increase of 83 cents per litre;
  • Diesel 0.05%: increase of 58 cents per litre;
  • Diesel 0.005%: increase of 57 cents per litre;
  • Illuminating Paraffin: increase of 56 cents per litre.

While the mid-month data serves as a snapshot, the Department of Energy makes adjustments based on a review of the full period. Furthermore, the outlook can change significantly before month-end.

Prices are affected by two main components – the rand/dollar exchange rate, and changes to international petroleum product costs, largely driven by oil prices.

At mid-July, a weaker ZAR/USD exchange rate is contributing to an under-recovery of around 26 cents per litre with changes to international product prices adding to the woes. Product prices for petrol have increased, contributing to a 32 cents per litre and 59 cents per litre under-recovery in the price of diesel and petrol, respectively.

Riots and looting

While the rioting and looting that erupted in parts of Gauteng and most of KwaZulu Natal this week are likely to factor into next month’s fuel prices through the wider damage to the economy and the rand/dollar exchange as a result of the chaos.

The rand buckled as news of the riots tanked sentiment towards South Africa, dropping 3% vs the dollar by Wednesday, threatening to stay in this weakened position as the country tries to pick up the pieces left in the wake of the destruction.

Adding to the price pain is the prospect of fuel shortages as a result of the riots, as road networks remain restricted – limiting the transport of fuel – and a major refinery in KZN remains closed.

These factors will have to be monitored over the next two weeks to determine what impact they will have on fuel price and the availability of fuel by August, but the impact will certainly be felt.

Exchange rate

As mentioned, the rioting and looting have had a negative impact on the rand, with the local unit dropping as much as 3.4% this month to hit a more than three-month low against the dollar.

Analysts note, however, that as is almost always the case, the strength or weakness of the rand is still primarily driven by international factors. This is more clearly seen in the bigger picture of the rand over the last year, where the currency right now is still much stronger than it was a year ago.

Over the past few months, there has been a significant recovery of the rand from the Covid-19 pandemic-induced lows which topped R19.30 in April 2020.

The recovery is not attributed to events that have occurred within the country, said Citadel Global director, Bianco Botes, but rather as a result of a global recovery in the wake of Covid-19, and decisions from major central banks, boosting risk-on sentiment for investors to push into emerging markets.

Looking at July, however, the rand is in a weaker position since the start of the month, and problems in the country persist, even beyond the riots and looting this week.

“Locally, South Africa still faces a dire economic trajectory, which was only worsened by the pandemic,” Botes said.

The effect of protests and looting on the economy remain a concern, she said, with the violence likely to only damage South Africa’s global reputation – while the damage to property as well as the job losses that will invariably follow adding to the fragility of the local economy.

“While the national tension will bring negative sentiment, it will not be responsible for a dictation of the direction of the rand – it will merely be one of the factors contributing to it, among many others,” said Botes.

International Product Prices

Oil prices have climbed steadily since the start of the year but settled into a ‘wait and see’ mode in April, which was largely maintained in May.

June saw prices climb above $71 a barrel amid rising demand – and that trend has continued in the first two weeks of July, with prices now around $74 a barrel, though under pressure on the political front.

The price of oil has been most impacted by the global Covid-19 pandemic and government responses to the virus, opening and closing economies as infections have spread. When economies close, demand drops; as they open again, demand increases.

This has been balanced out by producers cutting and opening supply as needed, while stockpiles have fluctuated according to forecasts. As major economies have moved to vaccinate their populations, the oil picture has become more stable. However, various geopolitical events are also at play.

The current oil landscape is dominated by a standoff or stalemate with OPEC+ regions over supply limits, while Covid-19 is still very much a factor.

According to Bloomberg, oil prices have whipsawed since the start of the month after OPEC+ abandoned a plan to boost supply from August due to an impasse with the United Arab Emirates. The UAE’s dispute with OPEC+ centres around its demand for a higher production limit next year.

A resurgence of Covid-19 in some regions has injected more uncertainty into the short-term demand outlook.

Despite the pressures, oil demand remains high – though still not at pre-Covid levels. The International Energy Agency has warned that the market would tighten significantly if the alliance didn’t add more barrels.

Fuel (Inland) July official August expected
95 Petrol R17.29 R18.16
93 Petrol R17.20 R18.03
0.05% Diesel (wholesale) R15.08 R15.66
0.005% Diesel (wholesale) R15.12 R15.69
Illuminating Paraffin R9.13 R9.69

Read: Worries over fuel shortages in South Africa as major refinery is forced to close

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Here is the expected petrol price for August