Business Reporter.
While the latest data from the Central Energy Fund for the week ending 17 March still shows an increase on the cards, the projected hike of around 8 cents per litre is far lower than at the start of the month when a 56 cents per litre hike was on the cards.
Diesel prices are still on course for a drop, with the data pointing to a 43 cents per litre cut in the new month.
Local fuel prices are tied to two key factors: the rand/dollar exchange rate and the price of oil. Oil prices factor into the cost of international petroleum products in the market, while the rand’s strength determines the cost of importing these products and fuel in general.
For much of March, the rand has been the major thorn in the side of petrol and diesel, accounting for an under-recovery in fuel prices of around 40 cents per litre.
While oil prices were at one stage contributing to an under-recovery for petrol (not diesel) in the month, the fallout from the collapse of big banks in the US and Europe has sent markets into a spin.
The price changes are now underpinning a 30 and 80 cents per litre over-recovery in local prices for petrol and diesel, respectively – an over-recovery which could track higher if oil prices continue to weaken.
Only 15 years after the Global Financial Crisis, two US banks, Silicon Valley Bank (SVB) and Signature Bank, imploded – and one bank, First Republic, teetered on the brink of collapse.
The crisis of confidence extended to scandal-prone Credit Suisse (CS), where a steep fall in its share prices and a run on the bank forced the Swiss National Bank to inject liquidity of $54 billion while arranging a takeover by its healthier and larger rival UBS.
News broke on Sunday (19 March) that UBS offered to buy CS for $3.25 billion.
Oil prices sank as escalating investor concerns about a global banking crisis eroded appetite for risk assets, including commodities. Brent crude, which has been range-bound between $80 and $90 a barrel, has fallen as low as $70 a barrel, while the US equivalent, West Texas Intermediate, plunged below $65 a barrel.
US benchmark crude futures retreated as much as 2.8% to $64.89 a barrel, the lowest level since December 2021 on Monday.
The decline came despite efforts by central banks to ease tensions.
According to economists at Nedbank, oil prices crashed 12.5% in the last week alone and are down 12.2% over the last month. Year to date, oil prices are down 13.4%.
While oil prices are currently supportive of lower fuel costs, the rand is still keeping South Africa down.
The currency is still trading significantly weaker at around R18.40 to the dollar, despite the dollar weakening due to the aforementioned banking crisis.