Big jump in petrol prices hitting next week
Despite a slight recovery in the rand and easing global oil prices, there is no hope for any relief at the pumps in South Africa next week.
As we enter the final week of August, month-end data from the Central Energy Fund points to a massive increase in store for motorists.
Petrol prices are expected to climb by around R1.60 per litre, while diesel will likely jump by a significant R2.80 per litre.
The Department of Mineral Resources and Energy is expected to announce the official changes between Friday (1 September) and Tuesday (5 September) before the changes kick into effect next week on Wednesday (6 September).
Drivers will be seeing a big price jump thanks to the weaker rand in August, which has trended higher against the US dollar this month, as well as the rising cost of oil.
While the rand ended last week firmer against the dollar at R18.62/$, the local unit started August in a much stronger position (around R17.90), pointing to a weakening trend overall. This has led to an under-recovery in local fuel prices of around 30 cents per litre.
Oil, meanwhile, has also trended far higher throughout the month, ending the week at around $85 a barrel – far higher than the $78 a barrel at the start of the month.
According to the CEF, this has led to a significant under-recovery in prices of between R1.30 and R2.40 a litre.
Combined, both factors are set to deliver a double blow to consumers at the pumps next week.
Looking ahead
While it’s too late for September relief, economists at Nedbank noted last week that things may look up for the remainder of the year.
On the oil front, a weaker-than-expected Chinese economy could put a damper on oil demand, which should lead to lower prices.
Also, despite efforts by the OPEC+ nations to curtail supply, futures have been trading near where they started the year.
However, this narrative could also be disrupted by the prevailing macroeconomy, where the world’s top central bankers are stressing the need to keep interest rates high until inflation is contained, as well as a stimulus package in China possibly providing further support for demand, Bloomberg reports.
The rand, meanwhile, is likely to remain unpredictable and volatile, given the economic realities faced by South Africa as well as its sensitivity to global shifts in sentiment.
According to Nedbank, the rand’s strong gains last week took it to a three-week high of R18.45/$, ensuring that the local unit ended the week firmer despite surrendering some of those gain late in the week.
Outside of comments from the global central bankers, better-than-expected local inflation data boosted hopes that the end of local interest rate hikes would help to ease pressure on domestic demand, giving the local unit a punt.
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