Petrol price pain hitting South Africa next week

 ·28 Feb 2024

Month-end data from the Central Energy Fund shows that a major petrol price and diesel price hike is cemented for March, with a hike of over R1.00 per litre expected for both fuel types.

The CEF data shows that the under-recoveries have pulled back from around R1.30 and R1.50 per litre for petrol and diesel, respectively, to around R1.20 per litre for both.

Despite the small positive movement, the hike building for March will still send petrol prices back over R24.00 a litre (95) and reverse much of the relief given through price drops since November 2023.

Between November 2023 and January 2024, petrol prices have come down by R3.20. February’s hike and March’s expected hike equal close to R2.00. For Diesel, prices have come down by R4.40 since November – with the February and March reversals also amounting to around R2.00.

As has been reported throughout the month, the main drive behind the coming hikes is the global oil price, which has been rangebound at relatively higher levels due to the ongoing tensions in the Middle East and supply pressures brought by OPEC+ nations.

However, the weaker rand has also played its part in pushing the under-recovery higher by trading at over R19.00 to the dollar.

The rand’s weakness is tied to a stronger dollar, where markets are anticipating the US Fed to take its time in cutting interest rates.

This not only affected commodity markets – which South Africa is part of – but also emerging market currencies, dealing a double blow to the rand.

According to Road Freight Association (RFA) CEO Gavin Kelly, the coming petrol and diesel price hikes are going to have a significant ripple effect on everything in South Africa, from transport to shelf prices.

He said that logistics companies, already under pressure from the last few years of price hikes and volatility in the market, will be forced to hike their prices.

With roughly 85% of all goods moved through and around the country having a road leg at some part in the journey, there will be increases to consumers as the cost to transport goods increases, he said.

“That cost will – in most cases – be borne by the consumer who will continue to feel inflationary price pressure in the short- to medium term,” he said.

While inflation in South Africa is eventually expected to settle around the 4.5% mark in 2024, the shorter-term view is that these pricing pressures will see inflation move higher in the first quarter of the year.

The Department of Mineral Resources and Energy is expected to publish the official petrol and diesel price adjustments sometime before they come into effect next week, on Wednesday, 6 March.

Read: Take-home pay increases in South Africa – but storm clouds are gathering

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