The latest data from the Central Energy Fund (CEF) points to petrol and diesel price cuts in South Africa in November 2023.
The CEF is a state-owned energy company reporting to the Department of Mineral Resources and Energy.
It provides the department with insights in support of policy development and regulation, including data which informs changes in fuel prices.
Mid-month data from the CEF points to a R1.97 per litre reduction in the petrol price and a cut of up to 77 cents per litre on the diesel price in November 2023.
The main contributor to the expected fuel price cuts is the lower oil price. In September, Brent Crude traded between $90 and $95 per barrel.
In October, the price declined to below $85 per barrel. For most of the month, it traded between $85 and $90 per barrel.
The rand has been volatile over the past month, trading as high as R19.53 to the greenback on 5 October and as low as R18.78 on 16 October.
Rand weakness in recent weeks will have a negative effect on petrol and diesel prices but has a small impact when compared to lower international oil prices.
The latest oil price and local currency moves point to a significant over-recovery in petrol and diesel prices in October.
The table below, courtesy of the Central Energy Fund, shows an analysis of the over-recovery based on the latest data.
|Change||Petrol 95||Petrol 93||Diesel 0.05%||Diesel 0.005%|
|Oil price movement||R2.05||R201||R0.88||R0.83|
|Exchange rate movement||(R0.08)||(R0.08)||(R0.11)||(R0.11)|
|Over recovery per litre||R1.97||R1.92||R0.78||R0.72|
Impact of lower fuel prices
Lower petrol and diesel prices have a far wider impact than merely making South Africans who travel a lot happy.
South Africa’s economy is highly reliant on road transport and fuel prices, therefore, impacts all sections of the economy.
The recent fuel price increases caused many products transported by roads to increase, which in turn drives up inflation.
Road Freight Association CEO Gavin Kelly said when the fuel price climbs, people are going to pay more for the things that are transported by road.
Kelly said fuel now constitutes 55% of the operational cost of moving a truck, and the industry has seen a 6.3% increase month-on-month in terms of fuel costs.
Higher fuel costs cause higher inflation, which raises the chances of the South African Reserve Bank (SARB) increasing interest rates again.
The expected fuel price decrease in November is good news and may impact the SARB’s interest rate decision. However, there are many analysts who remain concerned about inflation.
Emma Pretorius, head of investor relations for Amplify Investment Partners, said the recent uptick in the price of oil raises concerns about inflation.
Assuming the oil price hovers around $85 dollars a barrel for the remainder of 2023 and 2024, she expects inflation to return to target by the end of 2024.
SARB Governor Lesetja Kganyago also recently mentioned the risks to the inflation outlook, including higher oil and food prices and a depreciating currency.
He emphasised that South Africa’s already bleak economic prospects are further dimmed by the worsening state of the country’s fiscal situation.