Fuel prices in South Africa are expected to rise next week as the rand remains under pressure and global oil prices remain high.
Latest data from the Central Energy Fund (CEF) shows gasoline up 48 cents/litre and diesel up around R1.61/litre as current market conditions continue to put pressure on local prices geography.
According to CEF, the latest fuel price forecast for November is as follows:
Gasoline 93 & 95 will increase 48 cents/litre;
0.05% diesel will increase 1.61 Rand per liter;
Diesel 0.005% will increase 1.64 Rand per liter;
Paraffin will increase by 78 cents per liter.
The fuel price change will go into effect on Wednesday, November 2, with official announcement expected next week.
Domestic fuel prices depend on two main factors: the rand/US dollar exchange rate and fluctuations in world 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 may change at the time of official announcement ahead of further changes, they do not expect a reversal and a rally to come.
“While these numbers are subject to change, we do not expect a reversal; prices are expected to increase further in November. For now, it’s just the amount of those increases being put in place,” he said.
The association says diesel is a particular concern. Since diesel is a major input cost in many industries, an increase in the price of the fuel will ultimately hurt consumers as producers shift the increase down.
This is sure to exacerbate the cost-of-living crisis in the country, with food inflation of 11.9% in September, sending households back significantly.
Good news ahead?
While prices are expected to rise in November, the outlook could be better for December and beyond. The BER noted that the US Department of Energy will release 15 million barrels of its strategic reserves for delivery in December.
Meanwhile, President Cyril Ramaphosa said the Kingdom of Saudi Arabia and other countries Other OPEC has made the decision to focus on price stability in managing their oil production.
During recent intense bilateral talks held in Jeddah, Crown Prince Salman bin Abdulaziz Al-Saud briefed Ramaphosa on a number of economic initiatives that the Kingdom of Saudi Arabia is undertaking. including the Kingdom’s intentions to ensure oil price stability.
“Rising oil prices are contributing to higher fuel prices in South Africa, putting additional pressure on small businesses, consumers and households. The burden is heavier on the working class and unbearable on the poor,” the president said.
Ramaphosa says OPEC and Saudi measures can relieve South Africa’s strained economy. Brent
crude is currently trading around $93/barrel, holding below $100
