South African motorists are set to experience a welcome respite as petrol and diesel prices are expected to dip in December. However, the outlook for 2024 remains uncertain, with forecasts indicating a mixed trajectory for fuel costs, according to the latest insights from the research and consultancy firm, PwC.
Despite a projected decrease in fuel prices in the initial months of 2024, the overall trend indicates that prices are likely to linger at elevated levels observed throughout 2023. PwC’s economic models suggest a potential decline in fuel prices in 2024’s first quarter compared to the preceding quarter. It forecasts a drop in the average petrol price from R24.13/litre in 2023Q4 to an anticipated mean of R23.02/litre in 2024Q1. Similarly, diesel prices are expected to ease from R23.72/litre to R21.21/litre during the same period.
These projections are grounded in monthly futures prices for both Brent oil and the rand/dollar exchange rate. The estimations indicate a prospective decrease in the Brent oil price and a slight increase in the rand/dollar exchange rate.
PwC highlights the market’s anticipation of a gradual depreciation in the South African rand, moving from approximately R18.30/$ during its modeling to around R18.95/$ by the end of 2024. It emphasizes, “Expectations of a weakening rand align with long-term historical trends,” reinforcing its forecasts projecting the rand to average at R18.95/$ in the coming year compared to an estimated mean of R18.45/$ in 2023.
Contrastingly, financial markets foresee a gradual decline in oil prices over the same period. Brent oil is anticipated to decrease from roughly $81.80/bbl at the modeling stage to $79.50/bbl by the close of 2024.
Factoring in these estimations, PwC predicts a marginal increase of 0.6% in petrol costs for 2024 compared to 2023, while diesel prices are anticipated to decline by 0.6%. “These projections offer some relief, considering our headline inflation forecast of 5.2% for 2024,” states the consultancy.
However, PwC cautions that while fuel prices are not expected to reach the high levels seen in 2023 over the next two years, a gradual increase is envisaged for next year. This upward trend is attributed to a global decline in oil production, which sets a minimum threshold for market prices.
Citing the US Energy Information Administration (EIA), PwC underscores an estimated reduction in oil production by OPEC+ members of 340,000 barrels per day in 2024, totaling 37.8 million barrels per day. Additionally, the consultancy anticipates the rand to continue its historical trend of depreciation in the coming year, contributing to the fuel price forecast.
“The slight incline in our fuel price projections reflects the more pronounced negative trend in rand futures compared to the decline in oil price futures,” the report states.
South African motorists can expect a temporary reprieve in fuel prices but should remain prepared for potential fluctuations and a gradual upward trajectory in the near future, influenced by global oil production trends and exchange rate movements.
This outlook underscores the importance for consumers to remain vigilant and adapt to the evolving fuel price landscape in the upcoming year
