December is projected to see a significant increase in petrol prices, but there is some good news for diesel.
The Central Energy Fund (CEFmost )'s recent weekly estimates indicate that motorists paid for gasoline in December, although there are now some promising signs for diesel after months of significant price increases.
Petrol prices are now showing an under-recovery (therefore a probable rise) of roughly R1.20 per litre for December, according to the CEF's weekly statistics through 11 November 2022.
Meanwhile, the cost of diesel may decline somewhat by 2 to 6 cents per litre.
The government emphasises that the snapshot is only an indicator of gasoline prices and not a forecast. The projections are subject to change throughout the month along with the market conditions.
These are the anticipated pricing changes for the second week of November.
- Increase of R1.20 per litre for petrol 93/95
- Diesel 0.05%: a 6 cent per litre drop
- Diesel 0.005% represents a 2-cent per litre reduction.
- A rise of 43 cents per litre for paraffin
The latest daily fuel price snapshot from the CEF shows an improving trend, and if current market conditions persist, diesel prices could fall by 13 cents to 22 cents per litre in the upcoming month. This would be a small decrease compared to the R1.60 per litre hike seen over the previous two months.
The CEF's more thorough analysis of market movements reveals that the rising price of international petroleum products is the primary factor contributing to the pessimistic outlook for petrol. This has been slightly retracted thanks to a stronger rand.
The lower-than-expected US consumer inflation report from last week, according to experts at the Bureau for Economic Research, prompted investors to take on more risk, which helped emerging market currencies like the rand.
Investors changed their estimates of when US interest rates may peak downward, which caused US Treasury yields to decline. At the present market price, there is a 70% likelihood that US interest rates will increase by 50 basis points in December, ending a string of four increases of 75 basis points.
The dollar also experienced a big decline, reaching its lowest level versus the euro since August.
The rand benefited from the lower dollar as well, rising 4% versus the US currency last week to its highest level since September, according to the BER.
Despite this stroke of luck for the rand, oil prices, which are another factor influencing local gasoline costs, continue to be high, now trading at over $96 per barrel. Despite being below $100, it has increased from recent lows as market forces from supply and demand continue to exist.
Bloomberg economists note that there could be a spike in demand coming from China as the country appears to be loosening its grip on stringent Covid-zero restrictions. Despite the oil market is volatile, with prices dropping on Monday (14 November) after a rally last week, the country may be a major source of demand.
Since the OPEC+ alliance started a round of production cutbacks, Bloomberg said that an increase in Chinese crude consumption "may contribute to a further tightening of the market, which is facing European Union restrictions on Russian oil shipments next month."
In the meanwhile, the BER highlighted that month-over-month data indicates that market inflationary pressures are still present.
Monthly price hikes for energy commodities like fuel oil and gasoline have made a reappearance. The CPI rate was stable at 0.4% month over month in October after steadily falling since July, it added.
Local analysts have also issued a warning that rising oil prices might result in a sharp spike in gas prices come December.
At the end of the month, modifications to the price of gasoline will be made; they are scheduled to take effect on Wednesday, December 7.