Buckle up for more petrol price pain in South Africa next week

 ·28 Mar 2024

The latest data from the Central Energy Fund shows that a petrol price hike is cemented for April, while diesel users are in for some relief – with prices expected to increase by around 35 cents per litre for both fuel types.

The CEF data shows that the under-recoveries have pulled back from over R1.00 per litre for petrol at the start of the month, while the under-recoveries for diesel have remained somewhat stable.

Despite the slight positive movement, the hike building for April will still send petrol prices close to R25.00 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 decreased by R3.20. Since February – including April’s expected change – fuel hikes have totalled over R2.30.

For diesel, prices have come down since November, with reversals since February, which have also amounted to over R2.30.

The reduction in under-recoveries – and the move into over-recovery for diesel – are thanks to a stronger rand relative to last month and a lower oil price in rand terms.

Investec’s chief economist, Annabel Bishop, stated that fuel prices have contributed meaningfully to inflation since February.

This was when the fuel price increased by 75c/litre, along with the costs of private vehicle operation.

In March, petrol prices increased by R1.21/litre, which is expected to impact inflation significantly for that month.

Bishop added that fuel prices have been adding to volatility in the inflation figures.

However, April is expected only to see a small petrol price hike – as indicated by the CEF – as the international Brent crude oil price has dropped lower in rands.

The weakening value of the rand this week has also resulted in a decline in the chances of getting better petrol prices.

The rand has been fluctuating around R19 to the dollar (currently trading at R18.95) due to the expectation of global interest rates remaining high for an extended period.

Meanwhile, oil prices have surged above $85 per barrel after being stuck in a narrow trading range for most of the year.

A recent analysis by Bloomberg revealed that crude oil advanced overall in the first quarter despite its weakening in recent sessions.

This is due to US inventory drawdowns, OPEC+’s production cuts, and Ukrainian attacks on Russian territory, including against refineries, which intensified.

Despite these various influences, analysts have stated that oil markets have remained relatively calm and are anticipated to remain so going forward, with only small bouts of volatility expected.

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, 3 April.

Read: How banks could help bring down petrol prices in South Africa

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