A lower global oil price and a slightly stronger rand are serving to benefit local diesel prices, according the Bureau for Economic Research (BER).<\/p>\n
This means lower diesel prices are on the cards for May, where prices could come down between 26 cents and 51 cents per litre<\/strong>.<\/p>\n In its weekly market note, the BER said that the rand put in a “somewhat” better performance last week after starting on the back foot, ending the week “a touch stronger against the US dollar”.<\/p>\n Another positive was the more than 5% drop in the one-month Brent crude oil futures price, which the group said will also help ease local inflation.<\/p>\n “Diesel prices may come down somewhat \u2013 a welcome, albeit small, boon for those relying on generators during load-shedding<\/strong>,” the group said.<\/p>\n However, the positive moves are not enough to carry over to petrol prices, it said, which are still likely to increase.<\/p>\n According to the latest data from the Central Energy Fund for the week ended 21 April, petrol prices are still showing a significant under-recovery of around 60-65 cents per litre – largely due to persistently high international product prices for petroleum, driven by the higher oil price.<\/p>\n Oil prices were pushed lower in March 2023, hitting around $74 a barrel by the end of the month. This prompted oil-producing nations to cut daily supply, artificially boosting the price to around the $85 a barrel level.<\/p>\n Supply was also under question due to growing demand from ramped up production in China.<\/p>\n For the last week, though, oil prices kept falling in Asia \u2014 losing almost 6% last week \u2014 as the outlook for global demand remained in question and Asian fuel markets flashed warning signs on shrinking refining margins.<\/p>\n “Crude has wiped out nearly all of the gains seen after the Organization of Petroleum Exporting Countries and its allies blindsided markets at the start of the month with plans for a supply reduction,” Bloomberg analysts said.<\/p>\n “Russian refineries, meanwhile, have slightly reduced oil-processing rates for this month due to maintenance season and output cuts pledged earlier.”<\/p>\n Despite the bleak outlook for petrol prices, lower diesel prices will have a positive knock-on effect on the wider South African economy.<\/p>\n Not only will the cost of refilling diesel generators at private households be lower, but businesses and even power utility Eskom will also benefit. Those operating in the freight industry will be able to lower their operation costs, and public transport will also find relief.<\/p>\n This is particularly important given the context of stubbornly high inflation in South Africa. Wherever inflationary pressure can be eased, it will send the country more consistently back towards the South African Reserve Bank’s target range of 3% to 6%.<\/p>\n Headline inflation is currently at 7.1%, and is a market for further interest rate hikes. Inflation is currently being driven higher by food inflation – where diesel used in production and transport are one of the factors at place.<\/p>\n Economists and the SARB itself have expressed confidence that the rate will steadily return to the middle point of the range in 2023 as fuel and food price inflation continues to ease.<\/p>\n
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