Alarm bells for petrol prices in October
South African motorists and fuel users are still hurting from a massive increase in pump prices that hit this week – but September is off to a rough start, with the outlook for October starting squarely on the back foot.
The daily snapshot of balances from the Central Energy Fund (CEF) shows that the new month is starting in very much the same position as last month, with a significant under-recovery in fuel prices despite this week’s hike.
The group is currently showing a massive under-recovery ranging between R1.61 and R1.65 for petrol and an even bigger under-recovery of between R2.69 and R2.87 for diesel.
While the month has just started, and things can change significantly over the coming weeks, market conditions would have to swing wildly for both the rand and oil prices for these under-recoveries to reverse into a positive for drivers.
For example, August started off with a R1.25 per litre under-recovery for petrol and ended with a R1.71 petrol price hike for September. Diesel started August with an under-recovery of R2.30 and ended with a hike of R2.80.
An under-recovery usually happens when consumers are paying less than they should for the product on that day, while an over-recovery means the opposite.
The daily over- or under-recovery values are accumulated over the month, and the final excess or shortage amount is then incorporated into the pump price on the first Wednesday of the next month.
The CEF releases a daily report on the over-recovery and under-recovery of the basic fuel price.
According to the CEF’s data, prices are again under pressure from both the rand and the global oil price.
The rand has continued down its weakening path against the US dollar and is currently trading around R19.15/$. This is compared to the R18.67 average in August.
If the rand does not strengthen and the weakness persists for the rest of the month, the imbalance will continue contributing around 25 cents per litre to fuel price hikes.
Oil prices, meanwhile, have increased even further compared to August and are currently contributing to a R1.40 per litre under-recovery for petrol and R2.40-R2.60 per litre for diesel.
Oil prices have moved from a range of $82-$86 a barrel seen last month to sit at over $90 a barrel at the start of September.
Both the rand and global oil prices would have to swing wildly in motorists’ favour if there is to be any hope of petrol/diesel price relief in October.
While it’s still early days, the mid-month review for prices coming next week will give a clearer indication of what motorists can expect.
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