Sharp rise in petrol price predicted for January 2021

An increase in petrol and diesel prices is expected for January 2021 according to the Central Energy Fund mid-month fuel price data.

The CEF data shows an under-recovery across the board, with prices expected to rise between 30 and 33 cents per litre for diesel, and 51 to 52 cents per litre for diesel.

Petrol 95: increase of 30 cents per litre;
Petrol 93: increase of 34 cents per litre;
Diesel 0.05%: increase of 52 cents per litre;
Diesel 0.005%: increase of 51 cents per litre;
Illuminating Paraffin: increase of 52 cents per litre.

While the mid-month data serves as a snapshot, the Department of Energy makes adjustments based on a review of the full period. Furthermore, the outlook can change significantly before month-end.

Price changes are adjusted so that the over- or under-recovery during the prior month will be corrected in the following month; the over- or under-recoveries are rounded up or down to the nearest full cent so that the effect of rounding contributes to the clearing of the cumulative balance of the individual products on the slate.

However, the mid-month prices provide a strong indication of moving trends. Prices are affected by two main components – the rand/dollar exchange rate, and the changes to international petroleum product costs, largely driven by oil prices.

Exchange rate

The rand has performed particularly well against the US dollar in the first few weeks of December, with better-than-expected Q3 GDP data working with global positive sentiment over the rollout of Covid-19 vaccines.

The Covid-19 factor is still significant, with European nations re-entering hard lockdown boosting the rand, however, the threat of local restrictions dampening economic recovery still looms large.

President Cyril Ramaphosa announced on Monday night that certain new national restrictions will come into effect over the festive season, which will see alcohol trade restricted and beaches and parks in popular tourist areas closed during the busiest times.

The majority of the economy remained unaffected, however. This kept the rand within a tightly-traded range, at around the R15.00 to R15.10 mark.

Meanwhile, economic recovery hopes on a global scale have been placed on a series of Covid-19 vaccines which are expected to start rolling soon. The first doses of the vaccine have already made their way to public in the US, while South Africa will have to wait until early next year, in January, according to president Ramaphosa.

International product prices

Any benefit South African fuel prices have reaped from a stronger rand have been outmatched by a steady climb in international product prices for both petrol and diesel.

Since the start of the month, these prices have continued to climb above 100 US cents per gallon, driven predominantly by rising oil prices.

Following significant drops in the oil price near the end of October – as low as $38 a barrel – international prices have since climbed back towards $50 per barrel for Brent Crude.

Bloomberg reported that oil has dropped from a nine-month high on concerns that more pandemic lockdowns could slow a global rebound in fuel demand.

Expected changes

This is how the current prices would reflect at the pumps: