Petrol prices in South Africa flip for December
Petrol price recoveries in South Africa have flipped into the red for December, with only 93LRP now showing a small cut possible as the rand and global oil prices come under pressure.
According to the latest data from the Central Energy Fund (CEF) all fuel types, barring 93LRP, are now showing an under-recovery in pricing, meaning motorists are not looking at a merry time at the pumps over the festive season.
95URP petrol has flipped from a small positive over-recovery this month into an under-recovery of around 2 cents per litre. 93LRP is still showing a small over-recovery of 10 cents per litre.
Diesel drivers will be accustomed to the bad news, with the fuel being in under-recovery territory the whole month, sitting around 47 cents per litre likely to be added when priced are adjusted.
These are the expected changes:
- Petrol 93: decrease of 10 cents per litre (-3cpl)
- Petrol 95: increase of 2 cents per litre (-3cpl)
- Diesel 0.05% (wholesale): increase of 47 cents per litre (-3cpl)
- Diesel 0.005% (wholesale): increase of 47 cents per litre (-4cpl)
- Illuminating paraffin: increase of 43 cents per litre (-2cpl)
As has been the case for much of November, the trouble for fuel prices has come from both a weaker rand and higher global oil prices.
While the rand has pulled back from some of the highs seen in November—when it traded as high as R18.60 to the dollar after the election of Donald Trump as the next president of the United States—it still hasn’t managed to fully recover to under R18.00/$, and is a far stretch from the lows of R17.05/$ seen in recent months.
This is despite underlying strength in the currency from the positive sentiment being driven by reforms and the Government of National Unity (GNU) as well as the Reserve Bank’s recent decision to cut rates by a further 25 basis points.
According to Investec chief economist, Annabel Bishop, the rand has a lot going for it at the moment.
South Africa has seen the deficiencies on its grey listing worked down from twenty to five, making substantial progress to get off the Financial Action Task Force greylist since February 2023 in just over eighteen months.
Load shedding has halted since the end of March, while rail freight has picked up as the rail system becomes increasingly operable—albeit not yet fully meeting demand—replacing road freight to a small degree so far on mild progress.
The working relationship between business and government has strengthened, with the formation of the GNU adding to investor confidence in South Africa, with economic growth expected near 2.0% next year from close to 1.0% this year.
“These positive fundamental developments in South Africa have driven the underlying strength in the rand, as the domestic currency seeks to return to the R18.00/USD to R17.00/USD range, along with the ongoing US interest rate cut cycle,” Bishop said.
Positively, Bishop said that the rand is likely to go back into this range by December, if not before.
She added that the rand also tends to strengthen in December and January, often beginning in October after churn in September as financial market players in the Western Hemisphere return from summer vacations and become increasingly risk taking.
However, whether this will lead to a petrol price cut in December remains to be seen, as the balance of forces has less than a week to play out.
The other big factor—global oil prices—may just keep optimism contained.
After starting the month on a weakening trend, heading to around $71 a barrel, the price of oil has turned the other way and is now back above $75 a barrel.
Old Mutual Wealth Investment Strategist Izak Odendaal noted that oil prices have jumped due to the reemerged risks of geopolitics, after Russia fired intercontinental ballistic missiles at Ukraine.
However, at $75 per barrel, he added that the price of Brent oil remains towards the lower end of its broad trading range of the past two years, which is at least some consolation.
“In rand terms, the oil price is still lower than a year ago, and therefore still detracting from headline inflation. But this also creates a low base from which inflation will be measured a year from now,” he said.
Market analysts have cautioned that the oil price remains volatile and the heightened risk of escalation in conflicts in Russia and the Middle East will keep the market under pressure in the medium term.
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