More petrol price pain coming for South Africans

Petrol prices are set to increase again in May, with diesel prices decreasing as volatility continues to hit the global oil market. 

Data from the Central Energy Fund (CEF) shows that motorists in South Africa can expect a mixed bag for fuel prices in May.

As was the case for April, petrol prices are currently showing an under-recovery of around 30 cents per litre, lining up for a fourth consecutive price hike next month.

Diesel, meanwhile, is showing the opposite – an over-recovery of around 28 cents per litre – pointing to a price cut.

These are the expected changes:

• Petrol 93: increase of 35 cents per litre
• Petrol 95: increase of 34 cents per litre
• Diesel 0.05% (wholesale): decrease of 24 cents per litre
• Diesel 0.005% (wholesale): decrease of 29 cents per litre

The increases in the price of petrol and the gradual decline in the expected price relief for diesel are due to the volatility in the global oil market. 

Rand value, the other major factor in the price of fuel in South Africa, has positively influenced the expected price of fuel throughout April as the currency has slightly strengthened against the US dollar. 

According to the Central Energy Fund, the rand’s strength has positively influenced fuel prices by around 4c. 

However, the price of oil has a much larger impact on fuel prices in South Africa, and with supply shocks around the world, they have risen steadily throughout April. 

Portfolio Specialist at Ninety-One, Muhammad Docrat, said the price of oil could even hit $100 per barrel, significantly raising the price of fuel in South Africa. 

“Unfortunately for South Africans, we are likely to see upward pressure on petrol and diesel prices at the pump,” Docrat said. 

“It has been a perfect storm for the oil price with supply disruptions worldwide, from the Middle East to North America.” 

In particular, following Israel’s strikes on the Iranian embassy in Damascus, the chance of a large, conventional war in the Middle East is rising. 

As the region is one of the largest suppliers of crude oil, this has sent shockwaves throughout oil markets and caused the price to shoot up. 

This has compounded the already significant impact of disruptions to shipping through the Suez Canal, with oil tankers from the Middle East being forced to go around the southern tip of Africa. 

Other supply disruptions, including in Russia and the United States, are reducing output from key suppliers at the same time. 

Ukrainian drones are striking energy infrastructure deep within Russia, forcing the country to reduce its crude oil output. This further exacerbates the supply-demand imbalance, pushing the oil price up. 

In the United States, output reached record highs towards the end of 2023 but has since come down due to freezing weather at the beginning of 2024.

At the same time, the Organisation of Petroleum Exporting Countries (OPEC) is maintaining its production cuts to the end of the second quarter and imposed stricter enforcement of these limits. 

Adding to the effect of these supply shocks on the price of oil is the rising demand for fuel in the northern hemisphere as it enters summer and people there begin to drive more. 

Oil may hit $100 per barrel, but Docrat thinks this will be short-lived as supply disruptions are unlikely to last forever, and there is spare capacity to meet increased demand. 

He explained that OPEC has around five million barrels per day of spare capacity, which it will tap if the oil price remains elevated to capitalise on the higher price. 

However, in the short term, the price of petrol and diesel at South African pumps will remain elevated and is likely to tick higher in the coming months.