Staff Writer24 October 2022
Fuel prices in South Africa are expected to increase next week as the rand remains under pressure, and global oil prices remain high.
The latest data from the Central Energy Fund (CEF) points to a 48 cents per litre hike for petrol and a jump of around R1.61 per litre for diesel, with current market conditions continuing the pressure on local pricing.
According to the CEF, the latest projections for fuel prices in November are as follows:
- Petrol 93 & 95 will go up by 48 cents per litre;
- Diesel 0.05% will go up by R1.61 per litre;
- Diesel 0.005% will go up by R1.64 per litre;
- Paraffin will go up by 78 cents per litre.
Fuel price changes will come into effect on Wednesday, 2 November, with an official announcement expected in the coming week.
Local fuel prices are driven by two main factors – the rand/US dollar exchange rate, and movements in global oil prices.
The Bureau for Economic Research (BER) on Monday (24 October) noted that although it weakened modestly week-on-week, the US dollar remained firm, keeping global currencies – including the rand – under pressure.
“Statements from Philadelphia Federal Reserve President Patrick Harker suggested that the US central bank would keep raising interest rates for a while, coupled with lower weekly unemployment claims, bolstered the greenback,” it said.
On Monday, the rand was trading at R18.27 to the dollar, persisting at levels above the R18.00 mark.
The one-month ahead Brent crude futures contract, meanwhile, rose by 2% – despite the announcement of additional releases from the US Strategic Petroleum Reserve to help ease supply constraints, the BER noted.
Both the dollar strength and higher oil prices spell bad news for local fuel costs over the next week.
The Automobile Association said that, while final prices are likely to change by the time of the official announcement ahead of changes next, it does not expect a reversal, and a hike is coming.
“While these figures may change, we don’t expect a reversal; prices are still likely to go up in November. For now, it’s just the quantum of those increases that are in question now,” it said.
The association said diesel is a particular worry. Because diesel is a major input cost in many sectors, an increase in the price of this fuel will ultimately hurt consumers as manufacturers pass the increases down the line.
This will inevitably exacerbate the cost of living crisis in the country, with food inflation sitting at 11.9% in September, setting households back significantly.
Good news on the horizon?
Despite price increases pencilled in for November, prospects may be better for December and beyond. The BER noted that the US Department of Energy will release 15 million barrels from its strategic reserves to be delivered in December.
Meanwhile, president Cyril Ramaphosa said that the Kingdom of Saudi Arabia and other OPEC countries have taken a decision to focus on price stabilisation in their management of oil production.
During recent wide raging bilateral talks held in Jeddah, Crown Prince Salman bin Abdulaziz Al-Saud briefed Ramaphosa about a number of economic initiatives the Kingdom of Saudi Arabia is embarking on, including the intentions of the Kingdom to ensure oil price stability.
“Rising oil prices contribute to higher fuel costs in South Africa, which exerts further pressure on small businesses, consumers and households. The burden is heavier for the working class and unbearable for the poor,” the president said.
Ramaphosa said that the measures from OPEC and Saudi Arabia could provide relief to South Africa’s pressured economy.
Brent crude oil is currently trading at around $93 a barrel, keeping below the $100 mark.