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Gasoline and diesel prices in South Africa are expected to decline significantly in October, according to mid-month data released by the Central Energy Fund.
The group reports an excessive recovery in fuel prices across the board, which if sustained for the rest of the month could lead to a drop in gasoline prices of up to 36 cents per liter and 88 cents per liter for diesel.
These are the expected changes in mid-August:
- Petrol 95: 36 cents per liter decrease
- Gasoline 93: 27 cents per liter decrease
- Diesel 0.05%: 85 cents per liter decrease
- Diesel 0.005%: 88 cents per liter decrease
- Illuminating paraffin: 82 cents per liter decrease
These adjustments are based on the continuing decline in the international oil price, as well as the stabilization of the rand / dollar exchange rate at a lower level.
The rand has stabilized below R17.00 per dollar, having been stuck in the range of R17.20 and R17.60 for most of August. Prices have stabilized at around R16.60 per dollar as markets await guidance from major central banks.
The Monetary Policy Committee of the Reserve Bank of South Africa will announce a decision on rates this week, which will likely provide some direction, while the US Federal Reserve and the Bank of England are also expected to make announcements that could change investor sentiment.
Exchange rate movements have contributed around 18 cents per liter to the excessive recovery in fuel prices.
International oil prices have seen a gradual decline in September, the amount being much higher for diesel products, hence the biggest price drop.
International products are driven by refinery costs of different grades of fuel and movements in oil prices, which have again fallen below 40 dollars a barrel in recent sessions. International prices are down to $ 38 a barrel from around $ 44 a barrel in August.
The oil price drop is being driven by concerns about demand as the world continues to grapple with the Covid-19 outbreak and the consequences it has had on various industries, particularly China.
There are also concerns around a glut in the market, with major oil producing regions lowering prices to support demand. Analysts note that a second wave of Covid-19 in major economies could see prices rebound to pre-pandemic levels in 2021 alone, with some forecasting an increase of as much as $ 60 by the end of next year.
Movements in international fuel prices have contributed to an excessive recovery of 9-18 cents per liter for gasoline and 70 cents per liter for diesel.
The following table describes how price changes would be reflected on the pumps:
| Fuel (inside) | September Official | October expected |
|---|---|---|
| 95 Gasoline | R15.16 | R14.80 |
| 93 Gasoline | R14.89 | R14.62 |
| 0.05% Diesel (wholesale) | R13.27 | R12.42 |
| 0.005% Diesel (Wholesale) | R13.31 | R12.43 |
| Illuminating paraffin | R7.16 | R6.33 |
Read: Here is the official price of gasoline for September
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