South African motorists can anticipate a noteworthy reduction in petrol and diesel prices come December, thanks to a relatively stronger rand bolstering the over-recovery resulting from significantly lower global oil prices.
This development brings a breath of relief to the economy, especially in the aftermath of the alarming inflation figures for October, which were driven upward by fuel price hikes during that period.
Annabel Bishop, the chief economist at Investec, highlighted that despite the unexpected surge in inflation to 5.9% in October—surpassing market expectations of 5.4%-5.7%—the country is poised to conclude the year with inflation comfortably within the Reserve Bank’s target range of 3% to 6%.
While fuel price increases in September and October contributed to the inflationary pressure, the price reductions in November and the anticipated cuts in December are set to counteract this trend.
“November witnessed a substantial petrol price cut of R1.78/litre, exerting downward pressure on the inflation outcome. A further cut of approximately R1.00 per litre is also on the horizon for December, providing additional relief to inflationary pressures,” explained the economist.
Recent data from the Central Energy Fund (CEF) reveals that petrol prices are generating an over-recovery of about R1.05 per litre, while diesel is exhibiting an even more substantial over-recovery at R2.25 per litre.
The rand, which has been predominantly confined within the R19/$ range but has been unable to breach R18/$, continues to contribute to the over-recovery by maintaining a stronger position compared to the previous month.
Bishop noted earlier in the week that this is largely influenced by global sentiment, with a stronger US dollar causing the local unit to lose ground. The currency is expected to remain volatile, especially as the US considers its next move on interest rates, and global markets react to shifting sentiment.
Related Content
