South Africans will be seeing a welcome reduction of petrol prices this August, primarily from a resilient rand that continues to absorb the impact of the global oil market’s volatility. The Central Energy Fund (CEF) has announced in its latest report that there is currently an over recovery on petrol prices which will reduce the price of 93 octane petrol by 26 cents a litre and 95 octane by 23 cents.
Even though President Donald Trump announced a 30% tariff on South Africa starting August 1, the rand has been stable which perhaps provides an unexpected cushion. The three week delay prior to tariffication has provided some potential for negotiations, mellowing the market’s response.
While oil prices have increased from $66 to nearly $70 a barrel on the announcement of the tariffs, they are still lower from the peaks of earlier in the year as tensions brewed between Iran and Israel. With the temporary ceasefire in place and the focus shifting back to global trade and OPEC+ production, the oil market is leaning towards oversupply, again supporting a price reprieve for South Africa.
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The outlook for diesel is less optimistic. The wholesale diesel prices (0.05% and 0.005%) will rise by 58 and 56 cents per litre respectively, reflecting continuing high refining and processing costs.
Investec economist Annabel Bishop currently believes the rand’s strength is more about US dollar weakness than any domestic resilience. She mentioned that growing trade tensions and possible exclusion from the AGOA could put the rand under pressure and potentially bring the rand to near R18/$ in the next quarter.
However, at the moment, the strong rand is at least helping buffer consumers against global uncertainty and providing some short-lived relief at the fuel pump.
