South African motorists are in for a blow at the pumps in October, with the latest data from the Central Energy Fund (CEF) pointing to another massive hike for petrol and diesel.
According to mid-month data from the CEF, petrol is looking at a hike of between R1.15 and R1.22 per litre, and diesel between R1.93 and R2.03 per litre.
If these prices follow through to the end of the month, motorists will see fuel prices climb over R25 per litre.
These are the expected changes:
- Petrol 93: increase of 115 cents per litre
- Petrol 95: increase of 122 cents per litre
- Diesel 0.05%: increase of 203 cents per litre
- Diesel 0.005%: increase of 193 cents per litre
- Illuminating paraffin: increase of 187 cents per litre
Daily snapshot data for LP Gas is not presented by the CEF.
The Department of Mineral Resources and Energy (DMRE) has noted that its daily snapshots are not predictive and do not encompass other possible modifications, such as slate levy adjustments or retail margin changes. The department determines these adjustments, considering various factors, at the end of the month.
Domestic fuel costs are primarily governed by the rand/dollar exchange rate and international oil prices. In South Africa, the fuel price is adjusted on the first Wednesday of every month based on these two factors.
For October – like September – both the exchange rate and the oil prices are working against South Africa’s local pricing.
Rand/Dollar Exchange rate
The South African rand has remained on the back foot in September, sticking around the R19 to the dollar mark.
While recovering slightly at the start of the week, the local unit has suffered due to the country’s weakening fiscal outlook, which suggests that the National Treasury has run out of budget and may need to implement drastic cuts to keep South Africa afloat.
According to Investec chief economist Annabel Bishop, the hefty R143.8 billion fiscal deficit recorded in July has sounded alarm bells, with the markets not responding well to the data.
Economic data from the mining sector – also weaker than anticipated – has also kept the pressure on the rand.
South Africa’s total mining output fell 3.6% year on year in July after a revised 1.3% increase the previous month, Statistics South Africa data showed. Analysts polled by Reuters had predicted a 0.5% increase in July.
Meanwhile, the dollar has been trading stronger.
In fact, it’s a combination of both local and global factors keeping the rand weak at the moment.
The economic slowdown in China, concerns over inflation in the US, and the increase in political noise in South Africa ahead of the 2024 elections – all while the state’s finances are seeing market deterioration – are adding to rand weakness.
As a result, the weaker rand is contributing to a 24-28 cents per litre under-recovery in fuel prices.
Oil prices
Oil prices remain the biggest driving force behind fuel price under-recoveries at the moment, contributing between 90 cents and R1.76 per litre to expected price hikes at mid-September.
After trading just under $90 a barrel by the end of August, prices have now shot up to around $95 a barrel, pushing petroleum costs much higher.
According to analysis from Bloomberg, brent oil has seen price gains for three weeks in a row. This is due to a tighter market on the back of supply curbs from Saudi Arabia and Russia.
“The International Energy Agency and Organization of Petroleum Exporting Countries both warned this week that the market would be in deficit through the end of the year, helping to propel crude more than 4% higher since last Friday’s close,” the group said.
While supplies are under strain, demand has also held up on increasing signs the US may be able to avoid a recession, while data from China on Friday beat economists’ estimates in a sign the worst of the downturn is passing.
Crude prices have surged over 30% from a low in mid-June, with predictions from analysts that oil will reach $100 a barrel becoming less rare, Bloomberg said.
This is how the prices are expected to reflect at the pumps:
| Inland | September Official | October Expected |
| 93 Petrol | R24.14 | R25.29 |
| 95 Petrol | R24.54 | R25.66 |
| Diesel 0.05% | R23.05 | R25.08 |
| Diesel 0.005% | R23.28 | R25.21 |
| Illuminating Paraffin | R17.41 | R19.28 |
| Coastal | September Official | October Expected |
| 93 Petrol | R23.42 | R24.57 |
| 95 Petrol | R23.82 | R25.04 |
| Diesel 0.05% | R22.32 | R24.40 |
| Diesel 0.005% | R22.59 | R24.52 |
| Illuminating Paraffin | R16.48 | R18.35 |