Big petrol price increase coming

Petrol price

Renowned economist Dawie Roodt warned that South Africans should expect another big petrol price increase next month.

Roodt told Business Day TV that petrol and diesel prices will substantially increase next month – between R1.00 and R2.00 per litre.

His warning comes amidst a weaker currency and a significant increase in the Brent crude oil price.

The rand has been trading within a narrow range of R18.80 to R19.10 per US dollar for most of the week.

The local unit is under pressure from load shedding – despite the de-escalation over the weekend – and a firmer dollar.

To make matters worse, the Brent crude oil price reached its highest level since last November, leading to under-recoveries in local fuel purchases.

The International Energy Agency (IEA) and Organization for Petroleum Exporting Countries (OPEC) reported that a supply shortfall is expected for the rest of the year.

The Bureau for Economic Research (BER) said while it can still change, the under-recovery for various grades of petrol in September so far is at around R1/litre and almost R1.60/litre for diesel.

The latest data from the Central Energy Fund (CEF) indicates that even this estimate might be conservative.

According to mid-month data from the CEF, petrol is set to increase by between R1.15 and R1.22 per litre, and diesel between R1.93 and R2.03 per litre.

The higher fuel prices pose a risk to inflation. The August inflation print showed a marginal increase in South Africa’s consumer price index (CPI).

Stats SA announced that headline inflation ticked up to 4.8% in August, a marginal increase from 4.7% in July.

Average fuel prices increased by 2.2% between July and August, but fuel prices were 11.7% lower than in August 2022.

FNB senior economist Koketso Mano said the weak rand and higher international oil prices resulted in a sizeable fuel price hike in September.

This will shift fuel prices back into inflationary territory after recording annual deflation in the past three months.

So, while inflation remains in the South African Reserve Bank’s (SARB’s) target range of 3% to 6%, there are upside risks which should be considered.

As such, SARB Governor Lesetja Kganyago said the job of tackling inflation is not yet done, and more interest rate hikes could be on the cards.

“Given uncertain fuel and food price inflation, considerable risk still attaches to the forecast for average salaries,” he said.

“These risks remain, and should we see them materialise, we stand ready to act.”


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