December fuel price: Even bigger festive cut for diesel, petrol still in flux

If fuel price predictions for December remain on track, Mzansi motorists might even have some spare change in the cubby-hole to arm themselves with a customary pie and Coke “bribe” for their festive travels.

The latest daily snapshot from the Central Energy Fund (CEF) shows a continuation of November’s strong over-recovery, which could lead to a possible price cut of R1.03 for 95 Unleaded petrol.

December fuel prices: Expected changes in petrol, diesel

The petrol price equation has however come under strain recently due to a weaker rand.

If this trend continues, the petrol decrease might be in the region of 90 cents and R1.

Diesel users, however, can look forward to a much bigger decrease with the latest data pointing to price cuts of more than R2.20 per litre.

After November’s 85-cent cut, another R2.20 decrease in December will bring diesel prices to within 70 cents of where they were in January 2023.

Fuel and inflation

According to Investec chief economist Annabel Bishop, fuel price hikes in September and October pushed inflation higher – but price cuts in November and expected cuts in December will have the opposite effect.

“November saw a large petrol price cut of R1.78/litre, exerting downward pressure on the inflation outcome. A roughly R1 petrol price cut is also lined up for December, bringing further relief to inflationary pressures,” the economist told BusinessTech.

“December’s projected fuel price decreases come as a result of international oil prices having softened further this month. Brent Crude oil, for instance, has been trading in the $80 to $82 range for most of the month, after hitting highs of close to $98 as recently as September.”

The current situation at the pumps

The wholesale price for 50ppm diesel stands at R23.69 at the coast and R24.40 inland, but this excludes the retail margins which vary between outlets as this fuel is unregulated unlike petrol.

The retail price of 95 Unleaded petrol, after this month’s very welcome R1.78 decrease, stands at R23.18 at the coast and R23.90 inland, where 93 Unleaded costs R23.44.

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Rand/dollar and global oil prices

Domestic fuel costs are primarily governed by the rand/dollar exchange rate and global oil prices. In South Africa, the fuel price is adjusted on the first Wednesday of every month based on these two factors.

For December, lower oil prices have been working in the favour of lower prices, while a moderately stronger rand has also been adding to the over-recovery.

At the time of writing, on 27 November, Brent Crude oil slipped to $80 per barrel with the rand trading at R18.67 against a softer dollar.

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DMRE has the final say

According to the Department of Mineral Resources and Energy (DMRE), the CEF’s daily snapshots on the over-recovery and under-recovery of the basic fuel price do not encompass other possible modifications.

The department determines these adjustments, after considering various factors such as slate levy adjustments or retail margin changes whereby the controlled prices are adjusted on the first Wednesday of each month.

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Fuel price taxes and levies

In its analysis of the fuel price trend in 2023, FNB explained that within the total price of fuel domestically, taxes and levies make up 31%, with the general fuel levy and Road Accident Fund (RAF) levy accounting for the largest portion.

Government receives a revenue of R95 billion from the general fuel levy, which is used to fund public services.

Speaking to Newzroom Afrika in September, the People Against Petrol and Paraffin Price Increase’s (PAPPI’s) Visvin Reddy said the government could consider other alternatives to maintain its finances.

“That R95 billion doesn’t need to come from motorists and fuels. It can come from a special tax on the monopoly industry that sits on the JSE,” said Reddy.

“Take that R95 billion from a special tax on those companies, and immediately reduce the price of petrol in this country by 35%.”

• The DMRE will announce the official petrol and diesel price adjustments on Monday, 4 December before it will come into effect on Wednesday, 6 December.

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