The prospects for petrol price cuts in August are dimming fast, with the latest data showing a flat result and a likely hike for diesel.
Data from the Central Energy Fund shows that petrol prices have moved from a slight over-recovery of around 15 cents per litre at the start of July to around 7 cents. Diesel, meanwhile, is showing an under-recovery of up to 18 cents per litre.
While this points to a generally flat outlook for prices in August, it is a reversal of the downward trend seen over the past two months.
The main driver behind the turn is the rise in global oil prices, which are creating an under-recovery for fuel across the board.
South Africa’s saving grace has been the relatively stronger rand, which is contributing to an over-recovery of around 16 cents per litre and helping to soften the blow.
According to Bloomberg analysis of the oil markets, Brent crude has continued to climb this week on signs of stronger demand and signals that the US Federal Reserve is getting closer to its much-anticipated pivot toward lower interest rates.
However, prices have also been pushing higher against a backdrop of oil-producing nations (OPEC+) curbing supply, while vessel-tracking data shows a sharp slump in Russian exports lately.
This means that the market correction seen in the past few months—where prices dipped significantly—is likely over. However, the group did note that weaker demand from China may keep the escalation of prices contained.
Investec chief economist Annabel Bishop warned this week that after two months of falling petrol prices in South Africa on lower international petroleum product prices, the recent lift, if sustained, could see higher fuel prices in August.
According to economists at Nedbank, there are still positive angles to digest on the oil price, however.
For one, oil prices have remained below $94 a barrel—their highest level in 2024, set on 12 April—since late May, hovering between $83 and $90.
According to the Refinitiv consensus survey, the Brent crude price will remain rangebound in the second half of this year, edging up to around $85.1 at the end of Q3 and $81.55 at the end of Q4, averaging $83.93 for the year.
In addition, the stronger rand—which is again under R18.00 to the dollar this week thanks to optimism over the coming rate cuts—is likely to keep softening the blow.
“We expect a firmer rand to contain the impact of elevated global oil prices on domestic fuel prices during the remainder of the year, adding to overall inflation, but only moderately,” Nedbank said.
There are also hopes for oil.
Economists at the Bureau for Economic Research (BER) noted that Brent crude oil prices declined by more than 2% this week, buoyed by optimism surrounding a potential ceasefire between Israel and Hamas.
“The Middle East risk premium, long embedded in oil prices, tends to ease with signs of reduced tensions,” the BER said.
While wildfires in Alberta, Canada, threatened production, and Hurricane Beryl led to refinery shutdowns in Texas, Middle East geopolitical developments remain the primary driver of crude prices.
If local fuel prices cannot be contained, it is likely to keep pressure on households and headline inflation, with projections already pointing to a slower path to the Reserve Bank’s target of 4.5%.
Current estimations put inflation at an average of 5.0% in 2024, only moving to an average of 4.5% by mid-2025.
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