Cash-strapped motorists will go on a Christmas break this festive season relieved about their spending as fuel prices could see minor below-inflation fuel price increases in the beginning of 2024 after declining further in December.
Fuel prices have been among the largest drivers of consumer price inflation over the past 24 months, alongside food and electricity costs, accelerated by Russia’s invasion of Ukraine.
Petrol is 22% more expensive than two years ago, and diesel 41%.
However, a decline in global oil prices and a strengthening in the rand have recently supported an easing in local fuel prices following the 15-month highs seen in October.
Data from the Central Energy Fund indicates that consumers can expect a decrease of around R1.06 per litre for ULP 95, R1.05 a litre for ULP 93, and a massive decrease of around R2.10 a litre for diesel.
Based on the numbers, ULP 95 inland could drop to around R22.17 a litre, and R22.05 at the coast, marking the lowest pricing for this fuel since February, while the diesel price falls to around R22.15 a litre.
On Friday, the latest Drive Trends Report, which analysed the driving behaviour of more than 240 000 drivers on Discovery Insure’s Vitality Drive programme between January and October, showed that when the fuel price is around R22 a litre, the average client spends around R1 950 a month.
However, when the fuel price increases above R24 a litre, clients spend around R2 150 each month and get almost 3 litres less in fuel.
The data also shows that provinces with denser traffic conditions have higher fuel consumption.
As a result, clients in Gauteng, the Western Cape, KwaZulu-Natal and the Eastern Cape have an average fuel consumption that is nearly 1 litre per 100km more than that of clients in the other provinces as a result of the worst traffic in these regions compared to other provinces.
Discovery said that In the current environment, the fuel price put additional financial pressure on its clients and had resulted in a change in consumer driving behaviour as its clients were taking five fewer work trips a month on average compared to one year ago.
In its final South Africa Economic Outlook report for 2023, released on Friday, PwC forecasts that fuel prices should, on average, be lower in the first three months of 2024 compared to the current quarter.
PwC South Africa chief economist Lullu Krugel said the forecast model indicated that petrol could cost an average of 0.6% more in 2024 at R23.24/l, compared to an estimated R23.10/l in 2023, while diesel could ease to R21.40/l compared to an estimated R21.54/l in 2023.
Krugel said this was relatively good news when considering an average consumer price inflation forecast of 5.2% for 2024.
Nonetheless, she said the below-inflation forecasts would bring little relief to fuel users, considering that petrol and diesel prices had doubled over the past seven years.
“Following the fuel price declines in November and December 2023, both petrol and diesel prices are expected to bottom out in the first quarter of 2024, and then slowly increase during the remaining quarters of 2024,” Krugel said.
“This is based on expectations in financial markets that the depreciation in the rand exchange rate during 2024 will be slightly faster than an anticipated decline in global oil prices.”
There is a process under way in the government, which involves the National Treasury and the Department of Mineral Resources and Energy, to review the structure of fuel prices.
However, the latest Operation Vulindlela progress report noted that reviewing and adjusting the pricing formula was facing significant challenges, without elaborating further.
PwC South Africa senior economist Xhanti Payi said that until such time as a more formal announcement was made on restructuring fuel prices, there would be many perspectives on what exactly could be done.
Payi said the South African Reserve Bank, for instance, reported in August that it had identified seven elements within the fuel price that could be considered for reform.
The two reforms they view to offer the most significant benefits are a review of the Road Accident Fund, and the shift to a maximum petrol price.
“There are options on the table for a pricing formula review and even a small downward adjustment in fuel costs could have a meaningful positive impact on business operational costs and household consumption budgets,” Payi said.
“Nonetheless, with fuel prices rising over the medium- to long-term, local businesses need to implement appropriate strategies to save on the volume of fuel used in their transport fleets and manage operating costs.”