South Africans may see another fuel price decrease in January as the price of Brent Crude Oil has dropped substantially.
Although Brent Crude Oil averaged S$81.9/bbl in November and reached a high of $86.9/bbl, it has now dropped to $74.68/bbl.
Investec Chief Economist Annabel Bishop said that this was due to worries over demand, as uncertainty prevails over OPEC+ introducing new supply cuts.
“Previously, OPEC+ is seen to have exerted control over oil prices by alternating supply to the market, but recently, ongoing tightening in supply has raised concerns that flagging demand will see a lessening of supply not met with higher prices,” Bishop said.
“Additionally, speculative trading has also reportedly been instrumental in pushing down oil prices lately. Global demand is expected to weaken somewhat next year, and this has added to the dip oil prices are experiencing into year-end.”
On Wednesday (6 December), petrol prices dropped by 65 cents per litre, whilst diesel dropped by a massive R2.35 per litre.
Currently, the inland price for a litre of 95 petrol is R23.25 – a large decrease from the R25.68 seen in October.
According to early data from the Central Energy Fund, December is already off to a great start with both petrol and diesel setting off with an over-recovery similar to that seen in October and November.
Petrol is showing an over-recovery of around R1 per litre, while diesel is again pointing to an over-recovery of close to R2.30 a litre.
Bishop said that the recent decline in fuel prices was mainly due to lower international product prices, with further cuts building for January 2024.
Although OPEC+ wants to keep the oil price above $80.0/bbl, not all members and affiliates of the cartel are necessarily expected to comply.
Climate vs profit
As climate change concerns over the planned phasing out of fossil fuels, OPEC+ has been pushing up prices to increase profitability.
Speaking at COP28, chair of the Intergovernmental Panel on Climate Change, Jim Skea, said that fossil fuel use must be greatly reduced to limit global warming to 1.5 degrees Celsius by 2050 – he added that coal use must be completely phased out.
The international convention has been characterised by efforts to agree on the phase-out of fossil fuel usage, with no clear consensus established yet.
Although there have been efforts to scale up the “low-emission technologies” preferred by fossil fuel industries, such as carbon capture and storage and hydrogen, some fossil fuel producers are aiming to minimise these efforts.