South African motorists can expect a more significant reduction in fuel prices next week, thanks to a stronger rand and stable global oil prices in the final week of August. The latest data from the Central Energy Fund (CEF) indicates that the recovery in both petrol and diesel prices has improved, setting up for an even larger cut at the pumps.
According to the CEF’s data, the over-recovery for petrol prices now ranges between 84 and 91 cents per litre, while diesel shows an over-recovery between 74 cents and R1.00 per litre. This marks an improvement of approximately 25 cents per litre from mid-August estimates.
The Department of Petroleum and Mineral Resources is expected to confirm the official fuel price adjustments before they take effect on Wednesday, 4 September. The anticipated changes are as follows:
- Petrol 93: Decrease of 84 cents per litre
- Petrol 95: Decrease of 91 cents per litre
- Diesel 0.05% (wholesale): Decrease of 74 cents per litre
- Diesel 0.005% (wholesale): Decrease of 100 cents per litre
- Illuminating Paraffin: Decrease of 99 cents per litre
This positive adjustment is driven by two main factors: a stronger rand compared to the US dollar and stable oil prices, which have remained below $80 per barrel. The improved exchange rate has contributed around 9 cents per litre to the over-recovery, as the rand strengthened from R18.60 at the beginning of August to approximately R17.75 by the end of the month.
The stronger rand’s performance was influenced by increasing investor confidence in South Africa’s Government of National Unity (GNU) and the potential for ongoing economic reforms. Additionally, expectations of a possible interest rate cut in the United States have supported the rand, although South Africa’s own interest rate decisions have slightly tempered these gains.
On the global oil market, opposing factors have kept prices relatively stable. Concerns about political instability in the Middle East and potential supply disruptions from Libya have exerted upward pressure on prices. However, this has been counterbalanced by a subdued economic outlook in China, the world’s largest oil importer, and reduced diesel demand in Europe as the continent transitions to electric vehicles.
These fuel price cuts offer a welcome relief to South African consumers, especially following a series of price hikes earlier in the year that saw petrol prices rise by R3.00 per litre from January to May 2024. With the expected reduction in September, the total decrease since June will amount to R3.36 per litre, resulting in a slight net gain of around 36 cents per litre for the year.
This downward trend in fuel prices is also expected to have a positive impact on South Africa’s inflation rate, which has already shown signs of easing due to previous fuel price cuts in July and August. A further reduction in September is likely to contribute to continued inflation relief as the country heads into the fourth quarter of 2024.
