Not so good news for petrol prices in February

The December reduction in petrol prices provided a slight relief in inflation, as indicated by the latest Stats SA data. However, the winning streak in lower inflation might face a setback in February, poised for the first hike in three months.

December’s headline CPI (Consumer Price Index) surpassed market expectations, registering at 5.1%, maintaining an average of 6.0% throughout 2023. The reduction in CPI was influenced by a notable cut in petrol prices during that month, along with stable food prices.

Economists caution that the inflation trajectory is likely to reverse in early 2024, with January anticipating a climb to 5.8%, despite a minor drop in fuel prices at the beginning of the year.

February, on the other hand, is expected to exert more pressure on inflation figures, with indications pointing towards a 40 cents per litre increase in petrol prices.

Expectations for Petrol and Diesel Prices:

Based on the most recent Central Energy Fund data, diesel and petrol prices are currently experiencing under-recoveries, with an estimated increase of 43-44 cents per litre for petrol and 40-45 cents per litre for diesel in February. The under-recovery is attributed to both a weaker rand and a higher global oil price.

Although the rand slightly recovered to below R19 to the dollar, global tensions, particularly between NATO and Russia, impacted the currency, briefly pushing it above R19.20 earlier in the week. The rand’s fluctuation, even at Wednesday’s R18.90 levels, contributes to the under-recovery.

However, the primary factor behind the under-recovery is the global oil price. Bloomberg analysis notes a gradual increase in oil prices due to lower inventories and tensions in the Middle East. Brent, the global benchmark, approached $80 a barrel after starting the year around $75. Although geopolitical risks have countered supply expectations, analysts believe the impact on oil prices is linked more to increased costs and risk sentiment rather than actual supply constraints.

The anticipated changes in petrol prices for February are scheduled to take effect on 7 February 2024.