Mid-month data from the Central Energy Fund points to some relief for diesel drivers in April – but petrol is still lined up for a hike.

According to the daily snapshot for 14 March 2023, petrol prices are currently on course for a hike of 25 cents per litre, while diesel prices could come down by around 20 cents.

These are the expected changes:

• Petrol 93: increase of 25 cents a litre;
• Petrol 95: increase of 26 cents a litre;
• Diesel 0.05%: decrease 20 cents a litre;
• Diesel 0.005%: decrease of 22 cents a litre;
• Illuminating paraffin: decrease of 68 cents a litre.

The Department of Energy has stressed that the daily snapshots are not predictive and do not cover other potential changes like slate levy adjustments or retail margin changes, which are determined by the department at the end of the month, taking all variables into account.

The DoE makes adjustments based on a review of the entire period. Furthermore, the outlook can change significantly before month-end. Ultimately, the expected price changes are contingent on current market conditions persisting through the end of the month.

Local fuel price fluctuations are impacted by two main factors – the international price of petroleum products, driven mainly by oil prices, and the rand/dollar exchange rate used to purchase these products.

In the first two weeks of March, South Africa’s rand was hammered by a slew of negative economic data, which was exacerbated by risk-off sentiment globally. This has contributed to a significant under-recovery (increase) in fuel prices of around 40 cents per litre.

However, oil prices have also eased significantly, providing at least some balance – especially for diesel.

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Rand exchange

The rand has had a rough March so far.

South Africa as a whole has been hit with the perfect storm of bad news in the past few weeks, with the ongoing energy crisis, poor GDP data, declining business confidence and a current account deficit in negative territory all emerging against the backdrop of material risk-off sentiment in global financial markets.

As a result, the rand weakened to R18.74 against the dollar at one point, before recovering at the start of this week to around R18.20. The unit is currently trading slightly stronger at R18.16 on Wednesday (15 March).

The currency has been hit from both ends: weak GDP data for Q4 2022 signalled that the South African economy has likely entered a technical recession, with the damage from load shedding taking its toll. Load shedding has run a red line straight through the economy, beating down business confidence and generally impacting all facets of life in the country.

Adding to local woes, however, is a global aversion to risk – which pushes investors out of emerging markets like South Africa – due to the collapse of Silicon Valley Bank in the United States, which added to worries that the already tighter lending environment, on the upwards US interest rate cycle, would cause other banks to pull back on lending.

As much as problems hit the rand at home, it is inextricably tied to the state of the global economy and the US, in particular. This means that the current environment does not spell good news for the local unit in the weeks ahead.

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Oil prices

While the rand has taken a beating, global oil prices seem to provide some relief.

Oil prices have been range-bound between $80 and $90 per barrel for most of the year, bandied back and forth by switching narratives over global supply and demand.

On the one hand, demand forecasts have been higher thanks to China getting rid of its zero-Covid policy and opening back up for business. This has generally pushed oil prices up slightly, countering a narrative of a looming global recession and reigning productivity.

Higher prices have also been supported by supply issues as a result of sanctions against Russia over its war in Ukraine – with a price cap attached to Russian oil – and OPEC+ nations cutting production to support prices.

On the other hand, projections have been that China’s post-Covid production boom would be much slower than anticipated, and sanctions against Russia have had little impact on supply, pushing prices down.

According to Bloomberg’s analysis of the market, prices are still fluctuating between these narratives, and general volatility is expected.

“Oil has endured a bumpy year, whipsawed by aggressive monetary tightening from the Fed and optimism around China’s demand recovery. Further gains may be constrained in the near term, with OPEC forecasting a modest surplus in the second quarter, a typical period of soft demand prior to the summer,” it said. “The price cap imposed on Russian crude is working.”

For now, oil prices are favouring lower fuel prices back home. After trading around $83 a barrel in the first weeks of March, prices have now dropped below $80 a barrel and sit closer to $78 a barrel.

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This is how the expected price changes could reflect at the pumps:

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Read: Warning for petrol prices in April

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