Huge jump in petrol and diesel prices on the cards for September
Fuel prices in South Africa are primed for a big increase in September, with global oil prices shooting up thanks to supply and demand pressures – while the rand has also weakened significantly.
According to economists at the Bureau for Economic Research (BER), unease in global markets gave the rand a beating last week when a surprise credit rating downgrade for the US pushed investors into a risk-averse mindset.
This sent the rand crashing back above R18.00 to the dollar, with the local unit eyeing that R19/$ barrier last seen in June.
While the rand recovered some of its losses after the release of US payrolls data on Friday (4 August), the rand still ended the week around 5% weaker against the dollar.
“The biggest economy in the world added fewer jobs than expected in July, supporting the idea of an extended US policy interest rate pause,” the BER said.
At the same time, the group said that softer Chinese manufacturing data and intensified anxieties around non-US global growth saw crude oil prices shoot up around 1.1%.
This resulted in a sixth weekly climb for oil prices after Saudi Arabia and Russia pledged to extend their respective supply cuts through September.
“In addition, the US Energy Administration reported that weekly US crude oil inventories declined by a new record as exports and local demand ramped up amid the summer driving season,” the BER said.
And worse news for local drivers is that the higher prices do not appear to be in line for a drop any time soon.
“The resilience of the US economy, coupled with constrained supply, should support the oil price over the next couple of months,” the BER said.
“Having already recorded an unexpected merchandise trade deficit in June due to a decline in the value of exports, this is bad news for SA. With major SA export commodity prices under pressure, the continued increase in the oil price bodes ill for SA’s trade balance during the rest of the year,” it said.
Having a higher global oil price and a weaker rand means that both of the key factors that influence local fuel prices are working against motorists.
Week-end data from the Central Energy Fund (CEF) shows that there is already a huge under-recovery for both petrol and diesel prices.
As of 4 August, petrol prices show an under-recovery of R1.11 to R1.15 per litre, while the under-recovery in diesel is even larger at around R2.43 per litre.
Motorists are already stinging after a petrol price hike in August, with a litre of 95 petrol now setting drivers back R22.83 (inland) and diesel clocking in at R20.21.
If market conditions stay the same and carry through for the rest of the month, drivers could see petrol pushing to R24 a litre, while diesel would be heading for R23 a litre.
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