High petrol price dampens spirits

accreditation
0:00
play article
Subscribers can listen to this article
Prices for 93 and 95 octane petrol are expected to increase by 30c a litre and 41c a litre, respectively. Photo: File
Prices for 93 and 95 octane petrol are expected to increase by 30c a litre and 41c a litre, respectively. Photo: File

BUSINESS


Motorists with diesel cars will heave a sigh of relief when the diesel price drops by nearly R1.50 a litre on Wednesday morning.

The shortage of global diesel supplies has pushed up prices for some time, but the drop in the oil price last month, concerns over a global economic slowdown and the extended Covid-29 lockdowns in China – one of the largest importers of Brent crude oil – have seen the price come down.

Domestically, a stronger rand last month helped bring the price down.

At the same time, the petrol price will go up and this, together with increased food inflation and interest rates, will hit motorists hard, particularly those travelling over the December holiday period.

READ: Unemployment drops for the second time in a row

Prices for 93 and 95 octane petrol are expected to increase by 30c a litre and 41c a litre, respectively. This means 93 and 95 octane petrol tanks will pay an additional R24 and R32.80, respectively, while the average logistics vehicle with an 80-litre diesel tank will pay R118.40 less to fill up.

“The divergence we’re seeing this month was driven by an under-recovery in the petrol price and a large over-recovery in the diesel price by the Central Energy Fund.” FNB senior economist Koketso Mano says:

While the petrol price increase is discouraging, the magnitude of the increase is lower than initially expected.

“Vehicle owners will immediately feel the impact and will be paying more to fill up an average 45-litre petrol tank. It will now cost R1 029.15 (+R13.50) for 93 octane and R1 047.60 (+R18.45) for 95 octane. There’ll be some relief for diesel vehicle owners, who’ll now pay R1 080.45 (-R66.60) for diesel 0.05% and R1 083.15 (-R63.90) for diesel 0.005%.”

The driving forces for oil prices remain consistent and supply was still constrained, as the Organisation of the Petroleum Exporting Countries recently cut production targets to support oil prices and may be willing to take further steps to do so as a global activity slowdown unfolds, says Mano.

“Global refinery production remains tight and geopolitical risks are still heightened. On the demand side, constrained demand from China is expected to persist in the near term as the country grapples with its zero Covid-19 policy.

Demand could also be affected by slowing global growth, as the impact of rising interest rates continues to filter through. For the rand, the Federal Reserve is expected to hike rates by an additional 0.50% by the end of the year.”

Mano says:

This could weigh on the rand, which has recently strengthened. Further weakening of the rand may place some upward pressure on local prices.

The rand had recovered by 2% at the close of business on Friday, after staggering and declining by about 4%, as it seemed that President Cyril Ramaphosa might remain in office, despite rumours that he would resign in the wake of a scathing section 89 report by a panel of judges that found that he may have a case to answer regarding what transpired on his Phala Phala game farm in 2020.

On Friday, Mineral Resources and Energy Minister Gwede Mantashe allayed fears about Ramaphosa’s fate when he came out in support of the president and trashed the report, saying it had gaps and had been badly written.


We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Latest issue
Latest issue
All the news from City Press in PDF form.
Read now
Voting Booth
Damaged traffic lights and load shedding have led to a mushrooming of informal traffic controllers – mostly homeless people or beggars – in Joburg's major intersections. What are your thoughts?
Please select an option Oops! Something went wrong, please try again later.
Results
We need them
13% - 26 votes
Deploy professionals
48% - 96 votes
They pose more disorder
20% - 40 votes
They must be paid
19% - 38 votes
Vote