South Africa’s Fuel Price Cuts at Risk: Rising Oil Prices Threaten November Increases
South Africa’s months-long fuel price cuts could soon come to an end as rising oil prices and a weakening rand put pressure on fuel costs. Initial predictions of significant petrol and diesel price reductions for November 2024 have faded, with potential price cuts shrinking rapidly.
Fuel Price Mechanism
The Central Energy Fund (CEF) tracks over-recoveries, which indicate possible price reductions, and under-recoveries, which signal potential increases. At the start of the review period on 27 September 2024, the outlook was positive, with petrol prices showing over-recoveries of around R1.40 per litre, while diesel prices looked set for a similar drop.
Recent Developments
However, by 10 October 2024, these over-recoveries had nearly disappeared. Unleaded 95 petrol’s over-recovery fell to just 4 cents, and diesel’s over-recoveries were wiped out completely.
Economic Influences
Economists have pointed to two main factors driving this change: the rising Brent crude oil price, which exceeded $80 per barrel, and a weakening rand.
Global Context
The oil price surge is largely attributed to escalating tensions in the Middle East, including Iran’s missile attack on Israel on 1 October 2024. Fears of further conflict involving major oil producers like Saudi Arabia and the UAE have driven prices up, making fuel price cuts unlikely.
Conclusion
Unless there is a sudden drop in oil prices, South Africa could see its first fuel price increase since May 2024 in November.
