Petrol price increase likely for June as oil prices rise

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Johannesburg – South Africans have enjoyed some significant fuel price decreases in the last few months, but that trend looks set to reverse as South Africa’s fuel price equation has turned negative for the first time in months.

That does not necessarily mean that prices will return to their previous highs, but at this stage a price increase for petrol is looking highly likely, although thankfully diesel prices look set to decrease.

The extent to which petrol prices will increase is difficult to predict at this stage as the current calculation month started out in positive territory and then went negative as international oil prices rose. While things are currently averaging out at an increase of 49 cents, the daily data for the last week has been at R1.20 or more in the red. What that means is that if current trends persist until the end of the month, the petrol price increase will be somewhere between 50 cents and R1.20 a litre.

On the diesel front, the mid-month data is pointing towards a price decrease of around 55 cents, however that figure is on a downward path so the best case scenario for June would be a modest decrease.

“May oil prices rebounded off their late-April crash while the rand steadied around its new level, leaving a mixed picture for South African fuel users,” the Automobile Association explained.

“In a dramatic reversal of last month’s oil swings, international product prices used to calculate South Africa’s basic fuel price have nearly doubled since their lows at the end of April,” the association added.

“Over the same period, the rand has settled in around the level of R18.40 to the US dollar, almost three rand weaker than just three months ago prior to the advent of the Covid-19 panic and multiple downgrades of our economy by ratings agencies.”

Although a spate of heavy fuel price increases is unlikely at this stage as the Covid-19 crisis is still keeping oil prices as relatively low levels, in historical terms, the concern at the moment is that motorists could struggle to absorb any kind of increase, given the wide-scale job losses and salary cuts that have taken place.

By Jason Woosey


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