Expected petrol price in South Africa for December

A weaker rand has put upward pressure on petrol and diesel prices in South Africa, significantly reducing the likelihood of substantial cuts in December. 

Initial forecasts for December expect petrol prices to come down marginally and diesel prices to see a slight increase. 

However, while the oil price has remained relatively flat over the past month, rising slightly by 1.6%, the rand weakened sharply after the US election and has failed to recover. 

The Central Energy Fund (CEF) tracks the international price of oil and the rand-dollar exchange to forecast expected changes to the Basic Fuel Price in South Africa. 

It now forecasts the below changes to the prices of petrol and diesel in December. 

• Petrol 93 – decrease of 7 cents per litre
• Petrol 95 – increase of 3 cents per litre
• Diesel 0.05% – increase of 48 cents per litre
• Diesel 0.005% – increase of 48 cents per litre

The Department of Mineral and Petroleum Resources calculates official petrol and diesel pump prices using the average exchange rate from the past month. Similarly, the CEF also uses this methodology for its forecasts.

Consequently, the impact of a depreciating rand is expected to intensify before month-end, as its significant decline against the US dollar drives the average exchange rate upward.

A weaker rand increases the cost of importing oil and petroleum products into South Africa, resulting in higher fuel prices.

The rand has been in decline since the US election on 5 November 2024. Prior to the election, it was trading at around R17.46 per US dollar.

After Donald Trump’s victory was announced, the rand sharply depreciated due to a stronger US dollar, bolstered by safe-haven flows into US treasuries.

This trend was fueled by concerns over a deteriorating global economic outlook, rising US inflation, and diminished prospects for further US interest rate cuts.

By Friday, 15 November, the rand had weakened to R18.64/USD, its lowest level since August, before the US interest rate cut cycle began in September, as financial markets began adjusting their expectations.

The rand’s decline is illustrated in the graph below, provided by the CEF. It shows a lag in the impact on the average exchange rate.

While there is positive news regarding oil, its effects are unlikely to be felt before early next year, as the Organisation of the Petroleum Exporting Countries (OPEC) will only convene in December to review production levels for 2025. 

Throughout 2024, global demand for oil has been under pressure, largely due to China, the world’s largest importer, facing challenges in revitalizing its economy. 

Although the Chinese economy is expected to grow in 2024, it is likely to fall short of the government’s 5% GDP growth target for the year. 

In the United States, a Trump presidency has added further downward pressure on oil prices, with expectations of eased regulations for new oil wells and expanded shale operations. 

This could lead to increased US oil supply over time, applying additional pressure on global prices. 

The growth in US production may also force OPEC members to reconsider their production cuts for 2025, as they risk losing market share. 

OPEC has enforced production cuts throughout 2024 to stabilise the oil market and sustain higher prices. 

However, these efforts have fallen short, as rising US output and increased supply from South America have weakened OPEC’s influence. 

Key OPEC members, including Saudi Arabia, have begun discussing lifting these supply restrictions to protect market share and generate much-needed foreign currency to bolster state budgets. 

This shift is expected to exert downward pressure on oil prices over the medium to long term, offering little relief to South African motorists at the pump in December.

Below are the impact the CEF’s expected changes will have on petrol and diesel prices.