BUSINESS
Petrol prices lining up for another cut in February
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According to Investec chief economist Annabel Bishop, another fuel price cut is currently building for February 2024, which should ease inflationary pressures for the country.
The latest data from the Central Energy Fund is pointing to a small cut of up to 12 cents per litre for petrol, while diesel is in surer territory with a 50 to 60 cent per litre cut lined up.
If market conditions continue to favour the cuts for the rest of the month, this would lead to the fourth consecutive cut in fuel prices, bringing much-needed relief to households and industries.
However, conditions can change significantly during the course of the month, and a more solid picture can be gleaned around the middle of the month.
Bishop noted that fuel prices are key to South Africa’s inflation outcomes, and the significant cuts in prices seen from November have gone a long way in easing inflation and putting the country on better footing for rate cuts down the line.
“November’s large R1.78/litre cut in the petrol price helped pull inflation down to 5.5% y/y in November, from 5.9% y/y in October, and December’s 64c/litre cut should aid it lower, to around 5.2% y/y,” Bishop said.
The petrol price fell this week by 76c/litre and diesel by R1.18/litre.
The CEF’s data shows that, with the exception of 93 octane petrol, stable oil prices and rand are both contributing to small over-recoveries in the price.
Bishop said that a substantially stronger rand would aid in greater petrol price cuts, as well as exert some downward pressure on food price inflation, along with other commodity price inflation rates.
The rand is currently undervalued against the US dollar thanks to global and local sentiment issues – but a positive turn in the exchange would undoubtedly benefit the local economy.
According to PwC’s latest economic outlook for South Africa, petrol and diesel prices have risen by 22% and 41%, respectively, in the last two years, which has had a knock-on effect on inflation.
However, this is expected to ease as fluctuations in the pricing of international oil and the performance of the rand are expected to stabilise in 2024 – resulting in less substantial adjustments in the prices of petrol and diesel this year.
According to the firm, fuel prices should, on average, be lower in the first three months of 2024 compared to the current quarter of 2023.
Based on current assumptions, both petrol and diesel prices are expected to bottom out in 2024Q1 and then slowly increase (on average) during the remaining quarters of 2024 and into 2025.
Petrol could cost an average of 0.6% more in 2024, while diesel is projected to cost 0.6% less compared to 2023.
Full Story Source: Petrol prices lining up for another cut in February – BusinessTech