Expect a big jump in the petrol price next week

In a dramatic reversal of April’s chaotic fuel market, fuel prices are set to rise in June, the Automobile Association (AA) says, citing unaudited month-end fuel price data released by the Central Energy Fund.

South Africa is set to move to level 3 lockdown from next week, 1 June, which will see an additional 8 million people back at work.

The association said that petrol is expected to show a noticeable increase of up to R1.18 a litre, with increases of around 22 cents for diesel, and 41 cents for illuminating paraffin.

“The global lockdowns under Covid-19 saw fuel demand plummet. The resulting oversupply left storage bunkers full, with the extraordinary outcome that oil prices in the USA briefly dipped below zero,” the AA said.

The association noted that crude oil prices used to calculate South Africa’s fuel prices had fallen in lockstep with the reduction in demand, but are now inching up as economic activity begins to ramp up on a global scale.

“This is not unexpected, and South Africans should remember that the fuel price is currently around R4 per litre lower than it was before the Covid-19 crisis hit. Fortunately, the rand has strengthened during May, which has helped insulate the country from some of the rise,” the AA said.

The association also warned that despite the moderate price rise for diesel, motorists could encounter shortages of diesel in the short term.

According to the South African Petroleum Industry Association (SAPIA), “the economy has recovered more rapidly than expected, leading to a dramatic increase in the demand for diesel which refineries are currently not able to meet”.

The AA noted that some rationing of diesel is taking place, but that SAPIA says it expects diesel supply to normalise once both refineries in Durban reach on-spec production, which is anticipated to be at the end of May.

“We advise motorists to be pragmatic and anticipate fuel prices slowly returning to their previous levels over the medium to long term. It would be prudent to budget accordingly,” the AA said.

The table below outlines how these changes could reflect in June, if current conditions persist: