Diesel fuel prices are expected to increase again in August. The ongoing conflict in the Middle East has seriously impacted fuel prices in South Africa this year, causing sharp jumps in April and May.
Return of Tensions
Despite the temporary relief provided by the July peace agreement, the resumption of hostilities means that gasoline and diesel prices are unlikely to return to pre-April levels anytime soon.
Fuel Price Forecasts
According to the latest data from the Central Energy Fund, current forecasts predict a decrease in gasoline prices ranging from 21 cents (for 95 Unleaded) to 26 cents (for 93 Unleaded). However, the strong under-coverage observed over the past week is likely to reduce this decline by the end of the month, with calculations indicating only a slight drop of about five cents.
The situation for diesel fuel consumers is significantly more complex: current estimates suggest a price increase of between R1.63 (for 50ppm) and R1.80 (for 500ppm). These forecasts are based on the assumption that under-coverages will remain at their current level. If oil prices continue to fall, as they did in the last day, the increase could be between R1.30 and R1.50.
Impact of Tax Mechanisms
Another potential factor is the Slate Levy, a mechanism that helps compensate fuel companies for fluctuations in oil prices from the previous month. If the Slate Levy significantly decreases from the current R1.14 per liter, there might be a more substantial drop in gasoline prices. Nevertheless, given the volatility of oil prices this year, one cannot rely too heavily on such a decrease.
Although it is difficult to make an exact forecast of fuel prices due to recent market instability, the most likely scenario is that gasoline prices in August will remain close to current levels, while diesel fuel will see an increase of more than R1.
Current Market Figures
Currently, a liter of 95 Unleaded gasoline costs R25.23 on the coast and R26.11 in Gauteng, where 93 Unleaded gasoline sells for R25.94. The wholesale price of 500ppm diesel fuel is R23.91 on the coast and R24.78 inland, while 50ppm costs R24.41 and R25.16 respectively. These figures follow a significant drop in fuel prices this month: gasoline fell by R2.01 per liter, and diesel fuel by between R3.14 and R3.58 per liter.
Fluctuations in Global Oil Prices
International oil prices have shown extreme volatility this month, mainly because markets oscillated between fears of a supply shock in the Middle East and hopes that diplomatic efforts could prevent it.
At the beginning of the month, oil prices were at a three-month low, around $72 per barrel. However, the subsequent escalation of tensions in the Middle East, including exchanges of strikes between the US and Iran, led to a rise in prices, with Brent eventually exceeding $100 as markets priced in risks to flows through the critical Strait of Hormuz.
Nevertheless, hopes for another truce led to a drop in prices to around $88 this week, after falling by more than 8% in a single session. It is impossible to predict how events will unfold in the coming months.