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Tuesday, July 23, 2024

Diesel Prices Set to Come Down in May, While Petrol Prices Rise Sharply

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South African motorists can expect a drop in diesel prices next month as global oil prices stabilize.

According to the Central Energy Fund, diesel prices are set to decrease by between 18 cents to 41 cents per litre in May.

This is good news for transporters and other diesel vehicle owners who have seen the price of fuel steadily rise over the past few years.

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However, the same cannot be said for petrol prices, which are expected to see a big jump in May.

Despite the rand strengthening in recent days, petrol prices are still in line for a sizable increase of between 74 cents and 80 cents per litre next month.

This is mainly due to the cost of international products, which are directly linked to oil prices.

Even a slightly stronger rand is not enough to counteract the impact of rising oil prices, which have maintained their position around the $85 a barrel mark.

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The stronger rand can only counter product prices of up to +90 cents per litre by around -13 cents per litre.

While global oil prices have been fairly “rangebound” in recent weeks, according to analysis from Bloomberg, they have maintained their position around the $85 a barrel mark.

The recent rebound in crude prices came after tumbling to a 15-month low in mid-March following turmoil in the banking sector. However, weaker refinery margins are still a concern for the broader demand outlook.

Economists warn that rising oil prices could push inflation in South Africa even higher, including through higher fuel prices and other related costs.

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Investec chief economist Annabel Bishop previously noted that to counteract rising oil prices, the rand would have to strengthen to under R16 to the dollar, which would require an interest rate hike of 100 basis points.

The rand remains under pressure and on the back foot given the persistent power supply issues in South Africa with load shedding continuing to drag the economy down.

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