The reduction in diesel prices for South African motorists was not as significant as the petrol price, with analysts raising ‘red flags’ about a possible diesel price hike in the coming months.
On Monday (5 September), the Department of Energy published the latest fuel price update for September with a price drop between 46 and 56 cents per litre for diesel and R2.04 per litre for both grades of petrol.
Neil Roets, the CEO of Debt Rescue, said that the department’s announcement was followed by warnings of diesel price increases looming in the near future. The department said that demand for diesel would tighten globally as the Northern Hemisphere starts to shift away from gas heating, increasing demand for middle distillates like diesel.
Roets said this is a major fed flag as diesel is used mainly by farmers, haulage vehicles and emergency power generators, and any diesel price hike directly impacts transportation and the costs of manufacturing goods.
He said the added costs would invariably be passed on to those who buy the goods.
“This results in inflationary pressure which indirectly affects consumers, as everyone along the supply chain is forced to hike their prices.”
Why the difference
Peter Morgan, the CEO of the Liquid Fuel Wholesalers Association, told CapeTalk that the subtle change in price is a result of global demand for diesel exceeding the supply of the commodity.
Morgan said that the domestic diesel price is determined by traders who purchase the product from refineries at a flat rate and then sell it into the market. Despite this, everyone is now paying premiums for diesel out of worry about supply.
He added that South Africa’s domestic price links directly with the global economy, including:
- Fuel sale numbers in countries abroad;
- Stock levels in different globally;
- The behaviour of OPEC; and
- Geo-political issues.
Morgan said that diesel had acted uniquely for a few years, seeing higher demand than petrol since 2016.
In 2019, the two fuels no longer had similar sales levels, with approximately 13 billion diesel sales compared to 11 billion petrol, said Morgan.
During the pandemic, the disparity widened with sales for diesel slipping to 12.5 billion (1.5 billion fewer) compared to petrol, which saw a decrease to 9 billion (2 billion fewer).
Morgan predicts that by the end of 2022, the country will see demand patterns return to 2019 figures.
| Inland | August official | September Official |
|---|---|---|
| 95 Petrol | R25.42 | R23.38 |
| 93 Petrol | R24.99 | R22.95 |
| 0.05% diesel (wholesale) | R24.52 | R23.96 |
| 0.005% diesel (wholesale) | R24.62 | R24.16 |
Cost of living
The increase in diesel prices would lead to products on the shelves of grocery stores seeing a significant increase – adding to the already financially constrained consumer.
Gavin Kelly, the CEO of the Road Freight Association, speaking on behalf of the transport industry, said that if the price of diesel was reduced at the same rate as petrol, it would be good for the consumer.
He said that the cost of logistics would become cheaper, tempering rising food prices. 88% of goods in South Africa have some sort of road journey, and most of the consumer goods come via truck, he said.
South Africans simply cannot afford any further increases – especially in the price of foodstuffs – at a time when 81% of South Africans are cutting down on daily meals because they can no longer afford three square meals per day, added
The cost of living is the global crisis that South Africans are most concerned about. According to the Open Society Foundation in its latest Global Perspectives on a World in Crisis that polled 22 countries on key issues facing countries, worry over the cost of living outweighed concern over the Russia-Ukraine conflict and climate change.
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