While the South African rand reached record lows in recent weeks, global oil prices have heightened the chances of some much-needed fuel decreases for the month of June.
Consumers battling the cost-of-living crisis in South Africa are desperate for relief on their monthly budgets, and early data indicates this reprieve could come in the form of slightly lower fuel prices.
Fuel prices in South Africa are largely determined by oil prices globally and the strength of the local currency, the rand.
The fuel outlook for June remains positive, with significant reductions in all fuels likely in June.
Commenting on unaudited mid-month data from the Central Energy Fund (CEF), the Automobile Association (AA) says lower international product prices are the reason behind the predicted decreases.
“The weaker Rand/US Dollar exchange rate, though, is taking away from the forecast decreases, which would have been more significant had the Rand been stronger. As it stands, both grades of petrol are heading for decreases of around R1/l, while the decreases to diesel are currently standing at around R1.30/l. Importantly, the data is showing that illuminating paraffin, which is such an important fuel at this time of the year, is headed for a decrease of around 80c,” notes the AA.
The Association says any decreases to fuel prices now are welcome and will certainly bring relief to cash-strapped consumers, which, if realised, will bring prices down to rates last seen in February.
“These decreases are positive and will ease pressure on our economy and on consumers. Of course, this is only one indicator, and we cannot ignore higher interest rates and food prices, but a decrease to fuel costs will make a difference to many,” the AA says.
The Association notes that the outlook for June is made mid-month and will change before the official adjustment for June is made.
“Nonetheless, we remain confident that significant decreases will be seen to fuel prices for June,” the Association concludes.
The Department of Energy will announce official petrol price changes before they come into effect next week, from Wednesday, 7 June.
The South African Reserve Bank (SARB) added further pressures on consumers’ budgets last week after it hiked interest rates.
The bank announced that the repurchase rate (repo rate) would be hiked by 50 basis points.
The repo rate will now increase to 8.25% and the prime lending rate to 11.75% in the country.
This increase was the 10th consecutive increase since the start of 2022, with South Africans seeing the repo rate rise from 3.75% at the start of January 2022.
The country’s economy is also being battered by the state-owned power utility Eskom’s enforced rolling blackouts which makes it difficult for businesses to operate and citizens to live go about their daily lives.
Load shedding is severely hurting growth in the country, with the African Development Bank last week slashing its GDP growth forecast for South Africa.
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