Fuel prices have been a major driver of inflation in South Africa over the last two years, but data from PwC and the Central Energy Fund show that South African motorists can expect some good news for 2024.

According to PwC’s latest economic outlook for South Africa, petrol and diesel prices have risen by 22% and 41%, respectively, in the last two years.

However, this is expected to ease as fluctuations in the pricing of international oil and the performance of the rand are expected to stabilise in 2024 – resulting in less substantial adjustments in the prices of petrol and diesel next year.

“The futures market is pricing in a slow depreciation in the South African rand, weakening from around R18.30/$ at the time of our modelling to around R18.95/$ at the end of 2024,” said PwC.

Expectations of a weakening in the rand are in line with the long-term historical trend.

“Additionally, financial markets expect a slow decline in oil prices over the same period. Brent oil is priced to decline from around $81.80/bbl at the time of our modelling to $79.50/bbl at the close of 2024,” it added.

According to the firm, this suggests fuel prices should, on average, be lower in the first three months of 2024 compared to the current quarter of 2023.

Based on current assumptions, both petrol and diesel prices are expected to bottom out in 2024Q1 and then slowly increase (on average) during the remaining quarters of 2024 and into 2025.

The data indicated that petrol could cost an average of 0.6% more in 2024 at R23.24/litre compared to an estimated R23.10/litre in 2023. The slow upward trend in our fuel price forecasts reflects the negative trend in rand futures being slightly steeper compared to the decline in oil price futures.

Diesel, however, is projected to cost 0.6% less at R21.40/litre compared to an estimated R21.54/litre in 2023.

“This comes after notable declines in both product prices during November and December 2023, off the 15-month-high peaks seen in October,” said PwC.

“This is relatively good news when considering an average consumer price inflation forecast of 5.2% for 2024m,” it added.

However, despite the relaxation in prices, the firm noted with concern that petrol and diesel prices have doubled over the past seven years, which is a rate that is unsustainable for the fuel users in the country.

Good news for January

Mid-month data from the Central Energy Fund points to another cut in fuel prices at the start of 2024, with both petrol and diesel expected to come down.

As of 18 December, petrol prices are currently showing an over-recovery of between 53 cents and 67 cents per litre, while diesel is showing a bigger cut of between R1.18 and R1.25 per litre.

If these over-recoveries carry through to the end of the month, motorists and other fuel users will catch a much-needed break when they get back to work in the new year.

These are the expected changes:

• Petrol 93: decrease of 53 cents per litre
• Petrol 95: decrease of 67 cents per litre
• Diesel 0.05% (wholesale): decrease of 118 cents per litre
• Diesel 0.005% (wholesale): decrease of 125 cents per litre
• Illuminating paraffin: decrease of 119 cents per litre

Daily snapshot data for LP Gas is not presented by the CEF.

The Department of Mineral Resources and Energy (DMRE) has noted that its daily snapshots are not predictive and do not encompass other possible modifications, such as slate levy adjustments or retail margin changes. The department determines these adjustments, considering various factors, at the end of the month.

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