Any hopes that July’s significant fuel price decreases were the start of a downward trend were shattered with the resumption of hostilities in the Middle East on July 7, which has sent international oil prices surging.
While prices remain below the levels seen before the ceasefire, Brent crude has climbed significantly, rising from around $72 a barrel in early July to approximately $85.
But how will that affect August fuel prices in South Africa?
Petrol down, diesel up
That is the million-dollar question and, given the volatility seen this month, it is not an easy prediction to make. However, if oil prices and the rand remain close to their current levels until the end of this month, our calculations show that petrol will likely see a price decrease of between 40 and 50 cents per litre.
It’s bad news on the diesel front, however, with the projection pointing to increases in the region of 98 cents for 50ppm and R1.10 for 500ppm.
These predictions come with a big caveat, however, as the situation in the Middle East remains volatile and much can still happen during the remainder of this month.
For the record, a litre of 95 Unleaded now costs R25.23 at the coast and R26.11 in Gauteng, where 93 Unleaded retails for R25.94. The wholesale price of 500ppm diesel is currently pegged at R23.91 at the coast and R24.78 inland, with 50ppm costing R24.41 and R25.16 respectively.
Fuel price projections
Although petrol is still showing month-to-date over-recoveries of between R1.14 and R1.18 per litre, according to the Central Energy Fund (CEF), the latest daily data indicates under-recoveries of around 50 cents per litre. If current oil prices persist, those daily under-recoveries are likely to continue eroding the month’s average, reducing the size of the expected price cuts to around 50 cents or less.
Diesel presents a more concerning picture. While the CEF’s latest daily data shows under-recoveries of around R3.00 per litre, strong over-recoveries recorded earlier in the month are expected to soften the overall impact when the final August fuel price calculations are made. Based on current trends, this points to diesel price increases of around 98 cents to R1.10 per litre.
Will there be a truce in the Middle East?
The bottom line is that any further, sustained fuel price relief will depend on a renewed ceasefire between the US and Iran.
The past week has seen the US resume airstrikes on Iranian military targets, while Iran has continued to threaten shipping in the Strait of Hormuz, as well as striking targets elsewhere in the Middle East.
However, with the economic costs mounting rapidly for all parties, there appears to be a willingness to avoid a prolonged war. US officials have indicated a willingness to negotiate, while regional mediators continue their efforts to restart talks, according to Al Jazeera.
But while the two sides continue to exchange strikes, fuel prices are likely to remain elevated for the foreseeable future.
