The prediction of stabler international oil prices – which underpin local fuel prices – comes as many have decried the significance of the small R1.78 per litre cut in the petrol price from last Wednesday, as “too little too late” for struggling South African consumers.
FUEL prices in South Africa are likely to hold steady over the festive season barring a further unforeseen escalation of global geopolitical tensions.
The World Bank this week forecast that global oil prices could average $90 (R1,704) a barrel in the fourth quarter of this year, and fall to an average of $81 in 2024, as slowing global economic growth eases demand.
On Thursday, the Brent crude oil price was trading at $87.25 per barrel. The average Brent crude price fell from $91.86 to $88.72 a barrel in the month that led to the last local fuel price decrease.
This decline had been due to higher global crude oil inventories from increased production from non-Opec + producers, the lifting of sanctions on Venezuela by the US, creating a positive outlook on supply, and the low impact of Israel-Hamas war even though it was happening in the oil-rich Middle East.
However, the World Bank did also warn that an escalation of the Middle East conflict could spike oil prices significantly higher.
The prediction of stabler international oil prices – which underpin local fuel prices – comes as many have decried the significance of the small R1.78 per litre cut in the petrol price from last Wednesday, as “too little too late” for struggling South African consumers.
Consumers saw the price of petrol surge past R25 per litre level in October, following three consecutive months of significant price increases, and from Wednesday motorists started paying R23.90 per litre for 95 unleaded petrol and R23.44 for 93 unleaded.
Road Freight Association CEO Gavin Kelly said the effects of the lower fuel price would only be felt by the logistics supply chain some time later than the decrease in price on Wednesday, due to, for instance, stock being held in reserve in warehouses.
“There is much ‘fuel price lowering’ to ’flow under bridge’ before we start to see any ‘cooling off’ in retail pricing and inflationary pressures to the extent that interest rate declines, and cheaper consumer goods materialise,” said Kelly.
“Hopefully this will be the first of many reductions in the fuel,” he said.
The AA was reported as saying it too expected the decrease in fuel prices to remain in place throughout the festive season.
The last time South Africans were given a break from the ever-rising cost of petrol was back in July 2023 – when 93 grade petrol fell by 24c and 95 by an uninspiring 17c per litre, with diesel showing cumulative hikes of R5.71 since June.
“South Africans have been trapped in a relentless cost-of-living price increase cycle for most of the year, and our coffers are empty as we all head towards year-end,” Debt Rescue CEO Neil Roets said in a statement.
He said the accumulated impact of escalating electricity and food prices, consistent interest rate hikes and especially the relentless petrol price increases since February this year had pushed people to the very edge of a financial precipice.
The cost of fuel has a massive influence on household’s plans to travel, and the upshot of the still-steep petrol price is that millions of South Africans who take their once-a-year trip to visit their families in December may be staying at home this year due to an inability to afford the travelling costs, he said.
Adding to this, after cooling for the past five months, the annual inflation rate for food and non-alcoholic beverages inched higher to 8.1% in September 2023 from 8% in August 2023, according to Stats SA figures.
“Although a relief to many, the adjusted fuel price is still relatively high compared to the R21.40/l price mark at the beginning of the year,” said Abigail Moyo, spokesperson of trade union UASA.
“UASA urges its members and other workers to make wise travel arrangements ahead of the festive season, keeping in mind that January, with its education-linked expenses like school or university fees, school uniforms, and books, is around the corner.”
Also this week, Absa Bank said at the release of another weak Absa Purchasing Managers’ Index, that on the consumer front, “elevated relative (food and fuel) prices, as well as restrictive borrowing costs, are depressing demand for local manufactured goods”.
After ending the third quarter on a downbeat note, the Absa Purchasing Managers’ Index also had a poor start to the fourth quarter, with the headline index dropping further to 45.4 index points in October, from an upwardly revised 46.21 during September.
The index measuring expected business conditions in six months was down by more than 12 points to 43.4, seemingly due to adverse global events including poor activity data in the Eurozone and the UK and the outbreak of war between Israel and Hamas in October.
The World Bank’s latest Commodity Markets Outlook report found that by last week oil prices had risen by only about 6% since the start of the Israel-Hamas war, while prices of agricultural commodities, most metals and other commodities, had barely moved.
– BUSINESS REPORT
