As September 2023 approaches, South African motorists are bracing themselves for a significant surge in petrol prices, continuing a pattern that has persisted throughout the year.
Petrol price forecast for September 2023: Massive hike on the cards
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
The latest mid-month data from the Central Energy Fund (CEF) has unveiled potentially substantial price hikes for both petrol and diesel, highlighting the challenges that drivers are likely to face at the pumps.
Projected Petrol Price Increases
According to the current data, petrol prices are expected to experience an increase of approximately R1.35 to R1.40 per litre, placing additional financial strain on consumers. Similarly, diesel prices are projected to encounter a more substantial hike of around R2.60 per litre. These predictions, if realized, could result in fuel prices surpassing the R23 per litre mark.
The anticipated changes in fuel prices for September are as follows:
- Petrol 93: Estimated increase of 136 cents per litre
- Petrol 95: Expected rise of 139 cents per litre
- Diesel 0.05%: Anticipated hike of 260 cents per litre
- Diesel 0.005%: Projected increase of 259 cents per litre
- Illuminating paraffin: Envisaged surge of 253 cents per litre
Factors Influencing Petrol Prices for September 2023
The fuel price adjustments in South Africa are predominantly influenced by two critical factors: the rand/dollar exchange rate and international oil prices.
The fuel price alterations occur on the first Wednesday of each month, based on the fluctuations in these factors. However, the month of September poses challenges driven by unfavourable circumstances in both areas.
Impact of Exchange Rate and Global Market Dynamics
The exchange rate between the South African rand and the US dollar has recently been working against the interests of local motorists. The value of the rand has experienced a decline due to a range of factors, including persistent local issues such as load shedding and subdued business and consumer sentiment.
Additionally, global market conditions, characterised by a risk-averse mindset, have contributed to the rand’s depreciation.
Escalating Oil Prices
The second critical factor influencing fuel prices is international oil prices. August has witnessed a surge in oil prices due to heightened global demand and supply constraints.
Despite initial concerns over China’s economic situation affecting demand projections, oil prices have steadily risen throughout the month. From approximately $75 a barrel in July, oil prices have climbed to exceed $86 a barrel, leading to a significant under-recovery in local fuel prices.
Factors Contributing to Rising Oil Prices
Oil price increases have been driven by various factors, including production cuts by key players like Saudi Arabia and Russia, resulting in reduced supplies and tightening the global market.
The International Energy Agency (IEA) has reported record-paced global demand, supported in part by Chinese petrochemical activity. This trend is expected to persist throughout 2023, potentially leading to further increases in oil prices.
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, 2 August 2023.