Record Petrol Price Hike Signals Fresh Pressure for South Africa in November
Just as domestic petrol and diesel prices hit record highs, early under-recovery data from the Central Energy Fund (CEF) is warning of a massive R4,60/litre hike in November.
Investec Chief Economist Annabel Bishop notes that the primary driver remains persistent pressure on global Brent crude prices, which continue to hover above $100 a barrel, far higher than pre-Iran War levels of $65. "Combined with rand weakness, this heralds further large fuel price increases for South Africa in November," she explained.
The CEF’s latest daily snapshot shows an under-recovery driven by international product prices (contributing over R4,00/litre) and rand depreciation against the US dollar (adding roughly 50c/litre).
"The diesel price is also set for another jump in November of around R2,60/litre, which will put sharp upward pressure on production costs," Bishop said.
Diesel is a critical driver of producer inflation in South Africa, with the agriculture and freight logistics sectors already warning of rising input costs following the October price adjustments. Worryingly, wholesale diesel has doubled this year climbing from R17,00/litre in January to over R34,00/litre marking the largest annual increase on record.
Petrol prices have risen by a third since January and risk doubling if a near-R5,00/litre increase materialises next month.
Current CEF Projections for November
Petrol 93: Increase of R4,29 per litre
Petrol 95: Increase of R4,58 per litre
Diesel 0,05% (wholesale): Increase of R2,56 per litre
Diesel 0,005% (wholesale): Increase of R2,91 per litre
Illuminating Paraffin: Increase of R5,00 per litre
Calls for Government Fuel Levy Relief
Bishop noted that a temporary cut to the General Fuel Levy is warranted to protect struggling consumers and prevent CPI inflation from breaching 5,0% y/y. Similar calls have grown since pump prices neared the R30/litre mark in September.
National Treasury previously cushioned motor vehicle owners by slashing fuel levies by R3,00 per litre. However, Finance Minister Enoch Godongwana cautioned in September that further tax relief would directly impact the national budget and require offset funding. The previous relief package cost R17 billion largely offset by a mining commodity boom that is no longer in place. Any new cuts would require spending reductions elsewhere or increased state borrowing.
Despite the grim early outlook, Bishop emphasised that it is early in the review cycle. Fuel price adjustments depend on daily exchange rate fluctuations and international oil movements throughout October.
"The petrol and diesel price changes in November may not prove to be as large as currently signalled by the CEF," she said. "However, the risk is clear. Very large transport cost increases are once again being signalled down the line, following the historic highs reached in October."
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