Silver lining for rising petrol prices in South Africa this week

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A stronger rand exchange rate and the government’s decision to intervene on rising costs mean South Africa’s “record” petrol price rise this week will be relatively subdued, according to economists at the Bureau for Economic Research (BER).

The government’s intervention to cut the general fuel tax by 1.50 rand/litre for April and May means the price of petrol is set to rise by ‘only’ around 30 cents per liter on Wednesday (April 6), although diesel is still expected to rise by around R1.50/litre, the group said in a research note on Monday (April 4).

“Diesel and petrol prices will therefore rise further from record highs, but significantly less than forecast earlier in March. The estimated shortfall of R6 billion for the two months due to lower the fuel tax should be offset by the sale of strategic crude oil reserves,” he said.

“The government aims to benefit from the current (higher) prices with the sale and hopes that oil prices will have come down by June when the reduction in levies ends.”

Last week, the price of oil fell sharply after the United States announced it would release one million barrels a day of its strategic reserves starting in May.

The releases are expected to last six months, with the total release of 180 million barrels being the largest ever from the United States Strategic Petroleum Reserve. In line with its long-established production schedule, OPEC+ is also expected to increase production by 432,000 barrels per day from May.

“The oil market is expected to be short by around 3 million barrels per day of Russian oil in the coming months, possibly much longer, which means that even with the additional supply from the United States United and OPEC+, the oil market is likely to remain very tight,” the BER said.

“However, in the shorter term, very strict shutdowns in parts of China are expected to weigh on oil demand. Most notably, China’s commercial center of Shanghai has imposed lockdowns on most of its 26 million residents.

“The restrictions are so draconian that some residents are reportedly struggling to get enough food and other basic supplies as delivery services are overwhelmed with demand.”


Read: Massive change coming to South Africa’s petrol prices


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