Big drop in diesel prices coming in December

 ·27 Nov 2022

Motorists can expect a sizeable drop in the diesel price for December, according to the latest estimates from the Central Energy Fund (CEF).

The CEF’s estimates for the week ending 15 November show that diesel prices could come down by as much as R1.28 a litre when changes come into effect on Wednesday, 7 December.

However, prospects are not as good for petrol drivers, who could be paying 55 cents per litre more.

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 four of November.

  • Petrol 93/95: increase of 55 cents per litre
  • Diesel 0.05%: decrease of 124 cents per litre
  • Diesel 0.005%: decrease of 118 cents per litre
  • Paraffin: decrease of 23 cents per litre

The good fortune for fuel prices comes off the back of a stronger rand and lower global oil prices.

The rand dropped below R17 to the dollar this week after messaging from the US Fed pointed to a possibility of rate hikes in the world’s largest economy slowing down.

However, local rates were hiked by 75 basis points by the South African Reserve Bank in response to climbing inflation, keeping consumers and investors under pressure.

According to economists at Nedbank, inflation remains a big concern for the SARB. The central bank’s forecast for headline inflation for 2022 and 2023 was revised to 6.7% – up from 6.5% in September, largely due to higher food and electricity price inflation forecasts.

However, fuel price inflation is still expected to continue dropping over the medium to long term.

TreasuryOne said that the dollar continues to trade on the back foot on the prospect of smaller rate hikes from the Fed. Further lockdowns in some regions of China due to the spike in Covid cases is also keeping markets under pressure.

“The rand, which had touched R16.91 at one point (on Thursday), closed softer at R17.01 after it weakened post the SARB’s interest rate decision. The MPC hiked by 75 bps as expected, with the MPC seeing the inflation risks still lying to the top side,” it said.

The rand is expected to close the year averaging around R16.75 to the dollar, according to Absa’s economic models.

Oil prices

Oil prices have been dropping throughout the month, closing the week at $83 a barrel.

The oil price has maintained its low levels, driven by three main factors.

The first is the outbreak of Covid in China, which has dented production and severely cut consumption. As the Chinese government implements strategies to try and eradicate rather than control the virus – ie, the ‘zero-Covid’ approach – the world’s second-largest economy is slowing, dampening global demand.

This feeds into the second factor – the looming global recession. With a major slowdown in production expected, oil prices are following suit.

The final factor is the ongoing Russia-Ukraine war, which has led to sanctions being placed on Russia and its oil. However, a proposed fuel cap on Russian oil in the European Union of between $65 to $70 is unlikely to have any effect, given that Russia’s premium grades are currently selling for $52, according to Bloomberg.

Overall, oil market watchers are noticing supply concerns easing, supporting lower prices in the market.

Read: Here is the expected petrol price for December

Show comments
Subscribe to our daily newsletter