As the rand struggles against the US dollar, South African motorists are eagerly awaiting the petrol price forecast for June 2023, hoping for some respite at the pump.
UPDATE: On Monday, 5 June 2023, the Department of Energy published the petrol price adjustments for June 2023, confirming significant drops for petrol and diesel.
Petrol price forecast for June 2023: Relief expected for motorists
PLEASE NOTE: The petrol price adjustments listed below are directly quoted from the Central Energy Fund’s daily tracking of the basic fuel price (BFP) and do not necessarily reflect the final petrol price determined on the first Wednesday of every month. Despite our best efforts to ensure accurate reporting, it is still the sole responsibility of the reader to double-check petrol prices. Swisher Post, its parent company, partners and affiliates shall not be held liable for any consequence that arises from the journalistic duties performed in sharing this content
Recent data from the Central Energy Fund (CEF) indicates that petrol prices are experiencing an over-recovery due to lower global oil prices.
Barring any unforeseen developments, petrol prices are expected to decrease by approximately 80 cents per litre, while diesel could see a drop of around 90 cents per litre.
The primary driver behind this potential relief is the decline in oil prices, which has contributed to a substantial over-recovery of between R1.27 and R1.37 per litre.
However, the weakening rand has eroded a significant portion of these benefits, reducing the positive impact by about 43 cents per litre.
According to Bloomberg, oil prices rallied last week after US President Joe Biden and Republican House Speaker Kevin McCarthy reached a tentative deal on the US debt ceiling, averting a potentially catastrophic default.
While oil futures closed 1.2% higher on Friday, 26 May 2023, and continued to rise on Monday, 29 May 2023, they remain approximately 9% lower compared to the beginning of the year due to concerns over China’s slow economic recovery and the Federal Reserve’s tightening monetary policies.
The oil market has also been influenced by conflicting statements from Saudi Arabia and Russia regarding potential changes to supply policy from OPEC+.
This ongoing uncertainty surrounding supply dynamics has kept market watchers vigilant. Despite the positive trend in oil prices, the rand has been under persistent pressure throughout May 2023.
Market concerns initially arose due to fears of the collapse of Eskom’s grid, followed by allegations that South Africa supplied arms to Russia.
What goes into the final retail price of fuel in South Africa?
Determining the final retail price of petrol in South Africa relies heavily on the rand’s performance in currency markets and oil price movements. Using this information, the CEF can formulate basic fuel price (BFP) estimates which, in essence, offer South African importers a snapshot into the cost of buying petrol from an international refinery, transporting the product and ensuring it against possible losses at sea and on land.
However, before the retail price of petrol is finalised at petrol stations, several additional costs are included in the BFP:
Government levies
- IP tracer levy (reimbursement to the oil industry for buying IP tracer dye and injecting it into IP to curtail the mixing of IP and diesel)
- General Fuel levy (tax levied by the government)
- Slate levy (to finance the cumulative under-recovery of the industry)
- RAF levy (to compensate for people involved in road crashes and accidents)
- Petroleum products levy (reimbursement to the pipeline users for the applicable NERSA tariff on transporting fuel through the pipeline)
Additional costs
- Wholesale margin (markup to the price of a product to account for wholesaling costs)
- Service cost recoveries
- Storage, handling and delivery costs
- Distribution costs
- Dealers margin (commission to the fuel pump dealers for retail operation)
- Zone differential (applicable to inland regions)
- Customs and excise duty
Monthly adjustments to fuel prices are made on the first Wednesday of each month based on these factors. The next changes will take effect on Wednesday, 7 June 2023.