As things stand now and if nothing changes, South Africa will see another petrol price decrease of more than R1.00 per litre as well as a drop of over R2.00 per litre on diesel in January, the Fuel Retailers Association (FRA) forecasts.
Reggie Sibiya, the CEO of the FRA, said in an interview with “Business Report” that it was pleasing that fuel prices had come down over a long-term comparison.
“In July 2022 the litre of ULP95 inland was R26.74 and was this month sitting at R23.25, a decrease of 13%. However, taking into account consumer hardships due to the economic pressures, one is mindful that more relief is required,” Sibiya said.
Petrol is 22% more expensive than two years ago, and diesel 41%.
South African have had to contend with a tough year as inflation caused a cost-of-living crisis, elevated interest rates and soaring fuel prices, with things being further exasperated by rolling blackouts imposed by the ailing state-owned power utility, Eskom.
The FRA said the Opec Plus (40% of global output) cut on production outputs kept on posing a threat to the global sector. The unending geopolitical instability between Russia and Ukraine, and Hamas and Israel also continued to pose a threat.
Anchor Capital analysts said in a note yesterday that oil prices kept gaining as the US boosted strategic reserve as oil prices inched higher, extending gains for a second session as US efforts to replenish strategic reserves provided some support, though concerns of crude oversupply and softer fuel demand growth next year lingered.
Meanwhile, the FRA said its highlight for the year was the organisation winning the legal battle that had been going since 2014 in its quest to protect the profitability and the sustainability of fuel retailers in South Africa.
“The appeal judgment was still in our favour, agreeing that the current pricing model neglected badly the proper calculation and regulation of the fuel retailers profit margins. We expect the RAS Review to be implemented to bring long-awaited relief on fuel retailers’ profit margins.”
Sibiya said the year’s lowlight was that the operational expenses margin continued to under-recover because of certain expenses like credit card costs still not being compensated for in the margin.
“We are hoping that this will not require another legal battle as the court order has instructed the minister of mineral resources and energy to commission an appropriate RAS Review, something we have been calling for the past five years and which should address all under recoveries if done properly.
“On the safety and security side, the sector continues to bring innovations in terms of systems and various interventions to mitigate against crime, especially the bombings of ATMs and cash management devices. We remain resolute and overly committed in this area to protect our customers and our staff,” he said.
However, Sibiya said load shedding had been a serious challenge and would continue to be so as diesel costs of running the generator were just beyond comprehension and had added much pressure on already compromised retailer operating margin.
As South Africa experienced even higher stages of load shedding numerous times this year, it had affected the refineries’ ability to produce fuel, leading to a decrease in supply, according to a recent blog post, PetroConnect, a professional services company aimed at optimising efficiencies in the retail industry. The fuel shortages had then led to long queues at petrol stations, and some stations running out of fuel altogether.