Energy

Big petrol price increase in South Africa next month

A large petrol price hike is expected for February, as a higher oil price and a stronger dollar have put pressure on the rand oil price.

Investec chief economist Annabel Bishop said South Africans could expect a petrol price hike of around 75 cents in February. 

The oil price has lifted above US$81.0/bbl (Brent crude) this year, while rand weakness, or more accurately US dollar strength, has added to the pressure on the rand oil price.

Oil prices have lifted due to US sanctions on Russian oil, while US economic conditions have held up, displaying solid growth in the world’s largest economy. 

This has further supported oil prices, which have risen from close to US$70.0/bbl at the start of December.

The Central Energy Fund (CEF) tracks the global price of oil and the rand-dollar exchange rate to forecast the expected changes to the price of petrol and diesel in the coming month. 

The organisation’s latest forecast, released on Monday, 13 January, predicts the price hikes below for fuel in South Africa:

  • Petrol 93: increase of 81 cents per litre.
  • Petrol 95: increase of 75 cents per litre.
  • Diesel 0.05% (wholesale): increase of 90 cents per litre.
  • Diesel 0.005% (wholesale): increase of 88 cents per litre.

“If this occurs, it will be the largest rise in the petrol price for South Africa since February 2024,” Bishop said. February 2024 had the highest CPI inflation rate, at 5.6%.

However, this proved to be the year’s peak inflation, with the rate falling for the rest of the year and reaching 2.8% in October and 2.9% in November.

After the considerable fuel price rise in February 2024, petrol price increases essentially halved for March and again in April before falling by R4.44 per litre from May to September last year.

Bishop explained that the high base effect of a year ago will help keep inflation contained in February this year. 

The next data release for CPI inflation in South Africa is for December, which is expected to come out at around 3.0%.

“The prior moderate nature of fuel prices aided disinflation over 2023 and part of 2022, or only mild inflation increases last year, but the bigger jump in oil prices recently, and so likely fuel prices, would see quicker inflation,” Bishop said.

Investec chief economist Annabel Bishop

She said the incoming Trump administration in the US is expected to bolster the country’s growth on deregulation and tax cuts, with quicker growth supporting oil demand. 

“Broad sweeping changes influencing foreign policy and relations are also anticipated,” she said.

However, the latest World Energy Outlook by the International Energy Agency noted that China has been the engine of oil market growth in recent decades, but that engine is now switching over to electricity.

“The rise of electric mobility, led by China, is wrong-footing oil producers,” the organisation said.  

“The slowdown in oil demand growth in the Stated Policies Scenario (STEPS) puts major resource owners in a bind as they face a significant overhang of supply.”

“The country’s oil use for road transport is projected to decline in the STEPS, although offset by a large increase in oil use as a petrochemical feedstock.”

The report explained that China accounted for 60% of the new renewable capacity added worldwide in 2023 – and China’s solar PV generation alone is on course to exceed, by the early 2030s, the total electricity demand of the US today.

“There are open questions, in China and elsewhere, about how quickly and efficiently new renewable capacity can be integrated into power systems, and whether grid expansions and permitting times keep pace,” the report said.

“Policy uncertainty and a high cost of capital are holding back clean energy projects in many developing economies. Recent clean energy trends in advanced economies present a mixed picture.”

“Electricity use has grown at twice the pace of overall energy demand over the last decade, with two-thirds of the global increase in electricity demand over the last ten years coming from China.”

Bishop said that looking forward, oil prices this year risk being volatile, although the Trump presidency is expected to see some easing in tensions with Russia, which could see some subsidence in oil prices from current levels.

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