South Africans have just suffered another significant hike in fuel prices this week, marking the third consecutive increase for petrol and the fourth for diesel – but early data from the Central Energy Fund shows that the pain for the latter might not be over yet.<\/p>\n\n\n\n
The CEF’s daily snapshot for the start of October shows that, while petrol prices are lined up for a possible cut in November, diesel prices are again on the back foot, with another hike on the cards.<\/p>\n\n\n\n
Petrol is currently showing an over-recovery – thus pointing to a cut – of around R1.25 a litre. If sustained for the rest of the month, this would provide some relief to petrol users who have had to bear cumulative hikes of R3.22 per litre since August.<\/p>\n\n\n\n
The story for diesel is not as bright, however. The fuel is currently showing an under-recovery of 60 to 70 cents per litre. Diesel has seen cumulative hikes of R5.71 since July<\/strong>.<\/p>\n\n\n\n With prices having just gone up on Wednesday (4 October), it’s still too early in the month to make a definitive call on where fuel prices will head next – but the early indications give a good basis on which to measure the economic movements in the weeks to come.<\/p>\n\n\n\n Specifically, with oil prices having come down from highs around $95 a barrel at the end of September to around $85 at present, any significant fluctuations in the weeks to come will indicate how local fuel prices will be impacted.<\/p>\n\n\n\n The same goes for the second component in determining local pricing – the rand. The local unit is currently stuck above R19 to the dollar; a generally weak position. <\/p>\n\n\n\n While there are warnings that the currency could deteriorate over the longer term, in the near term, economists expect a relatively stable environment until the end of the year.<\/p>\n\n\n\n This is also reflected in the under\/over recoveries associated with the exchange rate. The weaker rand is currently contributing to an under-recovery of 6 cents per litre, which is not a significant impact relative to the oil price. If the rand stays fairly stable for the rest of the month, it shouldn’t factor in too deeply.<\/p>\n\n\n\n Thus, all eyes should be on global oil movements when setting expectations for November’s fuel prices.<\/p>\n\n\n\n According to analysis from Bloomberg, oil has held its sharp decline due to concerns that a slowdown in global growth will erode away consumption.<\/p>\n\n\n\n Oil prices have dropped due to stock supplies rising amid declines in demand.<\/p>\n\n\n\n “After rallying strongly in the third quarter, crude\u2019s upsurge has faltered. While the gains had fueled speculation that a return to $100 oil was on the cards, others remained sceptical, with notable bear Citigroup Inc. making the case that prices were on course to reverse as the market returned to a surplus,” it said.<\/p>\n\n\n\n “Oil\u2019s sharp retreat has come against a backdrop of rising worries about elevated interest rates and the global economy that has rattled equity and bond markets in recent weeks.”<\/p>\n\n\n\n According to Bloomberg, if this is sustained, it will help to cool inflationary pressures, globally. <\/p>\n\n\n\n
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