Early petrol price predictions for November come with a warning

South African motorists have been getting more revs for their money since June this year, with the October drop in petrol and diesel prices being the fifth consecutive fuel price cut for 2024.

This month’s decrease in fuel prices brought the prices for petrol and diesel to levels last seen before the invasion of Ukraine in 2022.

According to the latest data from the Central Energy Fund (CEF), even more petrol price gains could be on the cards come November.

Bad signs for November petrol and diesel prices?

A sudden swing in over-recovery has, however, cast a shadow over the prospect of yet another decent decrease in fuel prices.

In an alarming development, data shows that nearly 90 cents of the over-recovery in petrol prices have been wiped out in the space of a week.

On 27 September, the petrol prices of 95 Unleaded and 93 Unleaded 93 showed over-recoveries of R1.40 and R1.33 per litre, respectively.

However, by 4 October, the over-recoveries had shrunk to 56 and 62 cents per litre, respectively.

ALSO READ: It’s official! More than R1 drop in petrol and diesel prices in October

Surge in global oil prices

The latest predictions, captured on Monday, 7 October, point to cuts in the 30c to 40c/l range. The main contributing factor for this trend is a spike in international oil prices due to the escalating Israel-Iran conflict.

According to My Broadband, the trajectory indicates that an unfortunate shift from over-recovery to under-recovery could become a reality. This would result in petrol price hikes.

November fuel prices: Expected changes in petrol, diesel and paraffin

Here are the petrol and diesel price predictions (so far) for November…

• Petrol 93: decrease of 45 cents per litre
• Petrol 95: decrease of 36 cents per litre
• Diesel 0.05%: decrease of 33 cents per litre
• Diesel 0.005%: decrease of 34 cents per litre
• Illuminating Paraffin: decrease of 38 cents per litre

Drop in over-recovery: Rand/dollar and global oil prices

Trading Economics data shows that Brent crude oil was priced at just under $71 (R1,232) per barrel on 26 September 2024.

Prices quickly rose to around $79 (R1,371) per barrel by 7 October.

Another factor impacting the drop in over-recovery is changes in the rand-dollar exchange rate over the past week.

Crude oil and petroleum are primarily sold in US dollars, so this exchange rate significantly affects the amount South Africa pays for upstream supply.

Investec chief economist Annabel Bishop offers some hope with her prediction that the rand is expected to strengthen to around R17.20 to the dollar in this year’s fourth quarter due to improved economic activity and reduced political risk brought about by the Government of National Unity (GNU).

Mantashe says petrol, diesel should cost R14 per litre

Speaking at the African Oil Week (AOW) conference in Cape Town on Tuesday, Minerals and Petroleum Resources Minister Gwede Mantashe said the government remains committed to lowering the cost of fuel.

According to Mantashe, discussions between his department and National Treasury on how to decrease fuel prices are ongoing. This includes how to decrease fuel taxes that have pushed up prices at the pump to over R20.

The minister noted that the proper price of petrol and diesel should be R14, based on his department’s calculations.

“There is a broad discussion on how the fuel price can be reduced, taking into account the cost of living. One of the things we are looking at, including having engagements with National Treasury, is the RAF [Road Accident Fund] and general fuel levy [GLF].

“National Treasury will look into the impact on the fiscus for the general fuel levy, and we will look into the impact on general living standards,” he explained.

ALSO READ: Less petrol pain? Calls for fuel pricing review committee intensify

Levies ‘distorting’ fuel price

“The [levies] are distorting the fuel price in a big way. Unless we ring-fence these, we will not see a decrease in the price of fuel,” Mantashe added.

According to the RAF, its levy has remained stagnant for the past three financial years at R2.18 per litre of petrol and diesel.

GFL, which is limited to about R3.96 per litre for petrol and R3.84 per litre of diesel as of April this year, is one of the government’s main sources of tax income.

In the 2019/20 financial year, the levy made up 6% of the government’s total tax revenue, contributing R80 billion to the fiscus.

• The official fuel price adjustments will come into effect on Wednesday, 6 November.

Stay tuned to The Citizen for more fuel price updates towards the end of this month.

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