Get ready for higher petrol prices in July

South African motorists should prepare themselves to pay more at the pumps in July, with month-end data from the Central Energy Fund (CEF) showing a sizeable under-recovery in fuel prices.

The CEF data shows an under-recovery for all grades of petrol and diesel, pointing to an increase of between 17 and 29 cents per litre for petrol, and around 36 cents per litre for diesel.

• Petrol 95: increase of 17 cents per litre;
• Petrol 93: increase of 29 cents per litre;
• Diesel 0.05%: increase of 37 cents per litre;
• Diesel 0.005%: increase of 36 cents per litre;
• Illuminating Paraffin: increase of 31 cents per litre.

Fuel prices are officially calculated and adjusted on the first Wednesday of every month by the Department of Mineral Resources and Energy.

July fuel price changes will come into effect on Wednesday (7 July), with the department gazetting the official changes sometime before then.

The main driver behind the higher prices is the international oil price, which has surged significantly over the last month, leading to higher costs of petroleum products.

Oil prices are holding near their highest level since 2018, trading at around $75 a barrel – up even further still from highs seen in mid-June.

Prices have been driven by growing demand globally, as economies get back to business and populations get vaccinated against the Covid-19 virus.

While the stronger rand vs the US dollar, managed to keep the effect of rising oil prices on local under-recoveries in check, the picture has changed.

In recent weeks, the rand’s gains against the dollar have reversed, with the currency buckling from sub-R13.80 vs the dollar at mid-month, to around R14.25 vs the dollar at month-end.

The currency is down more than 3% so far this month – among the worst emerging-market performers in June, Reuters reported – and is now under continued pressure due to the level 4 lockdown restrictions which have been implemented for the next two weeks.

While still contributing to an over-recovery in fuel prices, the gains from the rand/dollar exchange rate are not large enough to balance out the under-recovery due to rising oil prices. This means that across-the-board increases for fuel are likely next week.