More petrol price relief coming for South Africans next month

South African motorists are set for substantial relief at the fuel pumps next month, with a stronger rand and lower oil prices driving down the expected prices of petrol and diesel. 

South Africa’s petrol price is largely determined by the global price of oil and the rand-dollar exchange rate, as most of the country’s fuel is imported. 

Taxes are levied on fuel at the pump, but these largely stay stable throughout the government’s financial year and are only changed during the Budget Speech in February. 

These taxes have remained unchanged for the past three years as part of the government’s efforts to ease the pressure on consumers of rising prices. 

Thus, the Central Energy Fund (CEF) uses the price of oil and the rand-dollar exchange rate to calculate the expected petrol and diesel prices for the next month. 

The fund’s latest set of data shows that motorists are in for further relief in September, with both petrol and diesel prices coming down. The expected changes are outlined below –

• Petrol 93 – decrease of 80 cents per litre 
• Petrol 95 – decrease of 85 cents per litre
• Diesel (0.05%) – decrease of 69 cents per litre
• Diesel (0.005%) – decrease of 95 cents per litre

This will add to the successive declines in fuel prices over the past three months, with petrol coming down over R2 per litre in that time and diesel over R1.50 per litre. 

These declines have also helped inflation in South Africa come down to near the midpoint of the Reserve Bank’s 3% to 6% target range. 

Stats SA’s latest inflation reading revealed that price pressures came down more than expected to 4.6% year-on-year. The successive declines in the price of fuel have played a large role in this. 

As a result, traders have not ruled out the possibility of a larger interest rate cut in September than previously expected. 

In combination, the declining fuel prices and likely interest rate cuts will significantly ease the financial pressure consumers are facing and free up disposable income for increased spending. 

This is set to boost the local economy and result in greater GDP growth for the rest of 2024. 

The expected decline in fuel prices next month has largely been driven by lower oil prices as global demand slows. 

Recent economic data out of the world’s two largest economies, the USA and China, has been weaker-than-expected and resulted in investors betting on slowing demand for commodities, including oil. 

Brent crude traded above $77 a barrel, about 3% lower this week, while West Texas Intermediate was near $73. 

Data this week showed that US manufacturing contracts are contracting at the fastest pace this year, and there are signs of labour market softness. 

In Europe, meanwhile, futures for diesel — a workhorse industrial fuel — have retreated to the lowest level in 14 months.

Oil has shed all of its year-to-date gains as the impact of OPEC+ supply curbs has been overshadowed by a poor economic outlook in major economies. 

This was compounded by increased chances of the war in Gaza coming to an end as Israeli negotiators travelled to Cairo for peace talks. 

The rand has also strengthened slightly compared to last month, with the currency even dipping below R18/$. 

These gains extend beyond the currency. The government’s rand bonds have handed investors total returns of 2.7% this month, outperforming the emerging-market benchmark, Bloomberg reported. 

However, with traders pricing in rate cuts in South Africa, the rand rally may face headwinds. Forward-rate agreements see at least 50 basis points of easing this year.