By Lehlohonolo Lehana.
The latest information from the Central Energy Fund (CEF) shows that diesel and petrol prices currently look set for increases, with current market conditions continuing the pressure on local pricing.
According to the CEF, the latest projections for fuel prices in November are as follows:
- Petrol 93 & 95 will go up by 48 cents per litre;
- Diesel 0.05% will go up by R1.61 per litre;
- Diesel 0.005% will go up by R1.64 per litre;
- Paraffin will go up by 78 cents per litre.
Fuel price changes will come into effect on Wednesday, 2 November, with an official announcement expected in the coming week.
Local fuel prices are driven by two main factors – the rand/US dollar exchange rate, and movements in global oil prices.
The Bureau for Economic Research (BER) on Monday (24 October) noted that although it weakened modestly week-on-week, the US dollar remained firm, keeping global currencies – including the rand – under pressure.
“Statements from Philadelphia Federal Reserve President Patrick Harker suggested that the US central bank would keep raising interest rates for a while, coupled with lower weekly unemployment claims, bolstered the greenback,” it said.
On Monday, the rand was trading at R18.27 to the dollar, persisting at levels above the R18.00 mark.
The one-month ahead Brent crude futures contract, meanwhile, rose by 2% – despite the announcement of additional releases from the US Strategic Petroleum Reserve to help ease supply constraints, the BER noted.
Both the dollar strength and higher oil prices spell bad news for local fuel costs over the next week.
The Automobile Association said that, while final prices are likely to change by the time of the official announcement ahead of changes next, it does not expect a reversal, and a hike is coming.
“While these figures may change, we don’t expect a reversal; prices are still likely to go up in November. For now, it’s just the quantum of those increases that are in question now,” it said.
The association said diesel is a particular worry. Because diesel is a major input cost in many sectors, an increase in the price of this fuel will ultimately hurt consumers as manufacturers pass the increases down the line.
Meanwhile President Cyril Ramaphosa has welcomed the decision by the Kingdom of Saudi Arabia and other OPEC countries to focus on price stabilisation in their management of oil production.
In a statement on Sunday, The Presidency said rising oil prices contribute to higher fuel costs in South Africa, which exerts further pressure on small businesses, consumers and households. The burden is heavier for the working class and unbearable for the poor, the high office said.
“During the recent wide raging bilateral talks held in Jeddah, HRH Crown Prince Salman bin Abdulaziz Al-Saud briefed Ramaphosa about a number of economic initiatives the Kingdom of Saudi Arabia is embarking on, including the intentions of the Kingdom to ensure oil price stability.
“Ramaphosa appreciated the development as a measure that could provide relief to South Africa’s pressured economy,” the Presidency said.
The Democratic Alliance said it is urgently seeking answers from the national government over the status of South Africa’s fuel reserves following a crippling strike at Transnet last week.
While the strike has ended, the party said that ports and transport networks experienced major disruption and fuel industry players have warned that the country is perilously close to a major fuel supply crisis due to the unavailability of refined fuel stocks.
The DA noted that South Africa has been sitting with fuel supply issues for the better part of two decades, with the last major crisis hitting in 2005.
“Since the release of the Moerane Commission of Inquiry Report into the fuel crisis that occurred in South Africa in November/December 2005, the ANC government has failed to implement the strategic refined fuel reserves recommendation, placing the country at severe risk of fuel shortages should there be a major disruption in the fuel supply chain,” it said.
The party said that a 2006 committee established that the country does not hold strategic refined product inventories and recommended that the government should review its policy on strategic fuel stocks.