The Fuel price for February ’24. What can we expect?

We were gifted a moderate and welcome decrease in the fuel price in December ’23. Another smaller decrease led us into 2024, again most welcome. So if you were driving to and back from your holiday destinations, those two decreases helped ease the burden on the budget. So what can one expect, not just for February but for the entire year? Well, not even a crystal ball can assist. There is just too much going on in the world and right here in Mzansi, it’s election year. The price of fuel is dictated to by the barrel price of crude oil and the rand against the dollar. Oil is a somewhat ‘threatened’ commodity, given the move to electric cars and the like. Our dependency on oil should be on a downward scare right? But seemingly, this is not the case. Back home, we are years away from any steady purchase of electric cars. We just don’t have the infrastructure to match what is expected. The less said about Eskom, the better. Then there is range anxiety, which I have personally experienced. But that’s a topic for another day.

Central Energy Fund

Mid-month data from the Central Energy Fund (CEF) points to a swing in fortunes for motorists and fuel users in the country, with prices building for a small jump next month. Petrol and diesel prices are in line for a hike, with the CEF showing an under-recovery for both types. Petrol is expected to be going up by between 11 and 14 cents per litre, while diesel is showing a possible hike of 3 to 9 cents per litre.

These are the expected changes:

Petrol 93: increase of 14 cents per litre

Petrol 95: increase of 11 cents per litre

Diesel 0.05% (wholesale): increase of 9 cents per litre

Diesel 0.005% (wholesale): increase of 3 cents per litre

Illuminating paraffin: decrease of 3 cents per litre

Daily snapshot data for LP Gas is not presented by the CEF.

The Department of Mineral Resources and Energy (DMRE) has noted that its daily snapshots are not predictive and do not encompass other possible modifications, such as slate levy adjustments or retail margin changes. The department determines these adjustments, considering various factors, at the end of the month.

For February 2024, higher oil prices have been working against motorists, but the relatively stable rand has offered some marginal support for prices.

Rand

While the rand has started the new year showing some volatility, it has remained squarely within the R18.20 to R18.60 range since mid-December 2023. According to Investec chief economist Annabel Bishop, despite the relative stability, the local unit is running counter to historical trends where it would usually strengthen in the early months of the year.

“Lower global financial risk-aversion around the turn of the year tends to see the rand experience lower volatility, and usually some strength – although this year, the domestic currency has remained weak on poor fundamentals,” she said.

Local issues appear to be the main culprit behind the rand’s weakness, with Bishop noting a bleak growth outlook and the tepid response to the government’s big energy plan (the Integrated Resource Plan 2023), which does not seem like it will be making a dent into the economy-crippling bouts of load shedding any time soon. Despite this, the rand is still contributing to a small over-recovery of around 3 or 4 cents per litre in fuel prices.

Oil

The main drive behind an expected petrol and diesel price increase is the global oil price, which is pushing up international product prices. Global crude benchmark Brent held above $78 a barrel after edging 0.2% lower on Monday. Oil prices are generally higher than they were in December, when prices were around $74 a barrel. According to Bloomberg analysis, the pressure on prices stems from tensions in the Middle East, which supplies around a third of the world’s crude oil.

While the Israel-Hamas conflict saw a war-risk premium built into crude late into 2023, those risks quickly faded after a couple of weeks. However, the more recent US-led attack on militant targets in Yemen last week, in retaliation for continued strikes on vessels, has now ratcheted up the tension again.

“The main risk is Iran gets drawn directly into the conflict, but oil markets seem to be discounting that possibility at this point,” Bloomberg said.

“More oil and gas tankers are now being diverted away from the Red Sea, with some companies and producers avoiding the route. Among the latest, Qatar appears to sending liquefied natural gas vessels to Europe via the longer route around Africa.”

With oil prices at current levels, they are contributing to an under-recovery in local fuel prices of between 3 cents and 14 cents per litre.

Here’s how the prices could be reflected at the pumps:

Inland January Official February Expected

93 Petrol R22.17 R22.31

95 Petrol R22.49 R22.60

Diesel 0.05% (wholesale) R20.63 R20.72

Diesel 0.005% (wholesale) R20.73 R20.76

Illuminating Paraffin R15.31 R15.28

Coastal January Official February Expected

93 Petrol R21.45 R21.59

95 Petrol R21.77 R21.88

Diesel 0.05% (wholesale) R19.91 R20.00