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Fuel Price. Another body blow for consumers!

South African motorists can expect a lighter blow in April when it comes to petrol prices, with the latest data showing a much smaller hike on the cards than at the start of the month.

Diesel users, meanwhile, can breathe a sigh of relief with current trends pointing to a price cut at the pumps.

Mid-month data from the Central Energy Fund shows that petrol prices are currently showing a small under-recovery of around 10 cents per litre for April. This is down significantly from the over R1.00 per litre under-recovery present at the start of the month, showing a massive swing in a positive direction.

Diesel drivers have seen the swing follow through, with the data now showing an over-recovery of around 35 cents per litre.

These are the expected changes:

  • Petrol 93: increase of 9 cents per litre
  • Petrol 95: increase of 10 cents per litre
  • Diesel 0.05% (wholesale): decrease of 32 cents per litre
  • Diesel 0.005% (wholesale): decrease of 36 cents per litre
  • Illuminating paraffin: decrease of 46 cents per litre

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 April 2024, higher oil prices have been volatile and present a mixed result for fuel prices – still contributing to an under-recovery for petrol but an over-recovery in diesel. The stronger rand, relative to February, is supporting prices.

It should also be noted that April marks the start of the new financial year for the government, where various tax hikes kick in. While there is no hike for the general fuel levy and Road Accident Fund levy in 2024, various other minor taxes may impact the final fuel price for April.

Rand

While hardly in a strong position, the rand has strengthened in March 2024 to at least trade below R19.00 to the US dollar, making a positive contribution to fuel price recoveries to the tune of 13 cents per litre.

The rand’s big swing came at the end of last week with market tensions easing on two fronts: the first is US interest rates, where the message for the US Federal Reserve that a cutting cycle is coming and ‘not necessarily far off’.

The US moving into a cutting cycle is likely to spur other central banks, including the South African Reserve Bank, to follow suit – however, the timing is still in question, with most analysts expecting the first cuts only in the second half of the year.

The second front is local, where anxiety over the coming 2024 elections is less pronounced. Polling – which is indicative, not predictive of the result – shows that populist (anti-business, damaging to economic growth) parties are not gaining in the country, easing some tensions.

Progress is also being made in the partnership between the government and businesses in resolving South Africa’s main crises, spinning some positive sentiments.

That said, all these factors are far from set in stone, and markets could swing out of the rand’s favour at short notice.

The rand is currently trading at R18.74 to the dollar, slightly weaker than earlier in the week, but still some ways off from the R19.00/$ mark.

Oil

Global oil prices have broken out of the narrow range they have been trading in for most of the year, pushing higher to over $85 a barrel.

According to Bloomberg market analysis, prices are now holding near a four-month high after the International Energy Agency forecast a supply deficit through 2024, changing its earlier projection of a surplus on the premise of oil-producing nations (OPEC+) maintaining production cuts.

The IEA assumes that OPEC and its allies will retain their curbs for the rest of the year to “balance oil markets,” Bloomberg noted.

However, while prices are rising now, this will reflect only in future pricing with current recoveries reflecting the impact of the range-bound prices over the past month or so.

In addition to this, Bloomberg noted some counter-pressures to the rising oil prices, including rising non-OPEC supply, China’s demand concerns and persistent US inflation that’s pushing back expectations for interest rate cuts.

This is how prices would reflect based on mid-month estimates

Inland March Official April Expected
93 Petrol R24.13 R24.22
95 Petrol R24.45 R24.55
Diesel 0.05% (wholesale) R22.42 R22.10
Diesel 0.005% (wholesale) R22.62 R22.26
Illuminating Paraffin R16.48 R16.02
Coastal March Official April Expected
93 Petrol R23.41 R23.50
95 Petrol R23.73 R23.73
Diesel 0.05% (wholesale) R21.70 R21.38
Diesel 0.005% (wholesale) R21.93 R21.57
Illuminating Paraffin R15.55 R15.09