Global financial tensions are expected to result on volatility in the international price of oil. Picture: Henk Kruger / Independent Newspapers.
Five consecutive months of fuel price declines come to an end today when the petrol price increases by 25 cents per litre and the diesel price increases by 20c/l for low sulphur 50ppm fuel, and 21c/l for 500ppm sulphur diesel.
The United Association of South Africa (UASA) trade union said yesterday that the price increases, against a background of constrained disposable incomes among consumers, was a disappointment just ahead of the festive season, when workers travel to go home and visit their families or go away on their annual holiday.
Both grades of petrol (93 and 95 octane) will increase by 25c/l, while the wholesale price of illuminating paraffin will increase by 21c/l. LPGas will cost consumers 36c/kg more.
South African Petroleum Retailers Association (SAPRA) chairman Henry van der Merwe said after an extended period of relief, the slight increase reflected current shifts in the global and local fuel markets.
"Increased fuel prices can put strain on both businesses and consumers, especially at a time when households and industries alike are navigating financial challenges. Fuel costs affect everything from production and transportation expenses to consumer purchasing power, making it crucial to remain resilient as we adapt to market dynamics," he said.
"While we always advocate for stability, these fluctuations are an inherent part of the broader energy landscape, and we remain committed to supporting consumers and businesses through this period," he said.
The Department of Mineral Resources and Energy said the main reasons for the fuel price adjustments were the increase in average international product prices for petrol, diesel and illuminating paraffin during the period under review.
FNB senior economist Koketso Mano said in a note the instability in oil prices was largely due to the ongoing tensions in the Middle East, where major oil-producing countries are located. The threat of supply disruptions and geopolitical conflicts in the region keep oil prices in flux.
"Despite this, prices have not been able to surpass the $75 per barrel mark, indicating a certain level of stability in the market. Furthermore, the global financial system and markets ought to be ready to sustain market activity through 2025. Given the continued geopolitical concerns, the current challenge views weak demand as a recurring theme, implying that greater supply would only result in lower fuel pricing."
Another factor impacting the fuel price is the rand/US dollar exchange rate as oil is imported into South Africa in US dollars. Mano said the rand/dollar exchange rate might experience volatility in the month ahead due potentially to, for instance, the US election.
Investec said in a note October's inflation rate had benefited from a large fuel price cut of R1.14/l and the next inflation print could come out close to 3% year-on-year, from 3.8% in September. November, in contrast, sees both a petrol price hike and a low base effect which would boost that month's outcome, causing CPI inflation to rise back to around 3.5% y/y, if not higher depending on October's outcome.
Oil prices were forecast to average $80/bbl in the last quarter of 2024 and there might be a sustained geopolitical premium in crude prices until global tensions resolve, J.P. Morgan Commodities Research forecasted last month. The average price of Brent crude oil in 2024 has been around $82.07 per barrel.
BUSINESS REPORT