Fuel Price Shock Looms: Diesel Set for Massive Hike as Petrol Relief Evaporates

More significant fuel price relief is unlikely for motorists in August, while the price of diesel is set to rise by more than a rand. South African motorists looking forward to more fuel price relief in August may have to temper their expectations, as current projections suggest only minimal petrol price reductions while diesel users could be hit with increases of more than R1 per litre. The latest data from the Central Energy Fund (CEF) currently indicates petrol price decreases of 21 cents per litre for 95 Unleaded and 26 cents for 93 Unleaded.

However, mounting under-recoveries recorded over the past week are expected to eat into those gains before month-end. It is a far harsher reality for diesel customers, with current calculations pointing to increases of between R1.63 (50ppm) and R1.80 (500ppm). These predictions are based on the assumption that the under-recoveries will persist at their current levels.

Should oil prices continue to retreat, as they have done over the past day, the increases could be in the R1.30 to R1.50 range. Another potential wildcard is the Slate Levy, a mechanism that helps compensate fuel companies for oil price fluctuations in the preceding month. If the Slate Levy sees a significant reduction from the current R1.14 per litre, then a more substantial petrol price reduction could be on the cards.

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But given how volatile oil prices have been this year, do not hold your breath. Although it is difficult to make an accurate fuel price prediction given the recent market volatility, the most likely outcome is that petrol prices will remain close to current levels in August, while diesel will see increases of more than R1. TheMiddle East warhas wreaked havoc on South African fuel prices this year, with sharp increases inAprilandMayfollowed by some relief in July. While a peace deal did bring some relief last month, theresumption of hostilitiesin July means it is likely to be a long time before petrol and diesel prices retreat to pre-April levels.

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