Petrol prices in South Africa are expected to rise by R1.39 per litre come September, while diesel prices could go up by as much as R2.60 per litre.
These expected increases are a result of an unfavourable rand/US dollar exchange rate during the first few weeks of August as well as a rise in international oil prices, which has a direct impact on the Basic Fuel Price (BFP) at which South Africa purchases its imported fuel at.
Between 28 July and 14 August, the rand depreciated from an average of R17.80/dollar to R18.94/dollar, contributing between R1.20 and R1.23 per litre to the price structures of petrol, and between R2.41 and R2.42 per litre to diesel.
Concurrently, the movement in international oil prices from $84/barrel at the end of July to around $86.40/barrel at the middle of August added another 16c per litre to petrol and 17-18c per litre to diesel.
With these inputs taken into account, fuel prices in South Africa in September are expected to be adjusted as follows, according to the CEF:
- Petrol 93 – Increase of R1.36 a litre
- Petrol 95 – Increase of R1.39 a litre
- Diesel 0.05% – Increase of R2.60 a litre
- Diesel 0.005% – Increase of R2.59 a litre
The CEF stresses, however, that these predictions and not the official changes that will be made by the Department of Energy next month, which could be higher or lower as they also take into account any potential changes in the Slate Levy, taxes, transport costs, or wholesale and retail margins.
What to expect for the rest of 2023
South African fuel prices are expected to continue their slow ascent upward for the remainder of 2023 due to a drop in oil production by the OPEC nations and an unstable local currency that is being flogged by domestic factors including load-shedding and social unrest as well as international inputs such as strength in the US dollar.
In July, Reuters reported that oil inventories around the world are starting to drop following a considerable output cut of 1 million barrels per day from Saudi Arabia, the global leader in oil production, thus setting the stage for higher prices to come.
By the end of August, analysts from Energy Aspects believe that the bulk of oil reserves that were built up during the first half of 2023 will be depleted, with “supply tightness” being accelerated by the Saudi cuts and the Northern Hemisphere’s summer season.
This trend will drive up the Basic Fuel Price and in turn, the prices we see at the filling stations, but fortunately, it is expected to stabilise in the fourth quarter of the year.
Locally, the performance of the rand will be the biggest contributor to fuel price hikes, or if it does well against the Greenback, price reductions.
Rand Merchant Bank expects “something of a rand recovery” for the remainder of 2023 and for the currency to end the year just above the R18/dollar mark, which will hopefully contribute to keeping fuel costs below the all-time high of R26/litre that we saw back in 2022.
Keyword: Massive petrol price increases expected for South Africa in September