Trouble ahead for petrol prices in 2024

 ·5 Dec 2023

South African motorists can breathe a sigh of relief for petrol and diesel prices in December – but they should brace for a choppy 2024, forecasts show.

The latest economic outlook from research and consultancy group PwC shows that fuel prices are set to decline in the first few months of 2024, but overall, prices are likely to remain at the same elevated levels seen in 2023.

PwC’s modelling currently indicates that fuel prices could be lower in 2024Q1 compared to the current quarter, with the petrol price expected to decline from an average of R24.13/litre in 2023Q4 to a forecast mean of R23.02/litre in 2024Q1.

Diesel, meanwhile, could ease from R23.72/litre to R21.21/litre, it said.

These forecasts are based on monthly futures prices for both the Brent oil price and the rand/dollar exchange rate – where the former is expected to decline, while the latter is expected to climb slightly.

PwC said that the market is pricing in a slow depreciation in the South African rand, weakening from around R18.30/$ at the time of its modelling to around R18.95/$ at the end of 2024.

“Expectations of a weakening in the rand is in line with the long-term historical trend,” it said.

“Our houseview forecasts suggest a similar trajectory: we expect the rand to trade at an average rate of R18.95/$ next year compared to a projected mean of R18.45/$ in 2023.”

With oil prices, however, financial markets expect a slow decline in oil prices over the same period. Brent oil is priced to decline from around $81.80/bbl at the time of the modelling to $79.50/bbl at the close of 2024.

Based on these projections, PwC said that it forecasts petrol to cost, on average, 0.6% more in 2024 compared to 2023, while diesel is projected to cost 0.6% less.

“These margins are relatively good news considering our headline inflation forecast of 5.2% for 2024.”

The consultancy said fuel prices are not anticipated to reach the high levels seen in 2023 over the next two years – but they are expected to edge higher next year due to a decline in global oil production that puts a floor under market prices.

“The US Energy Information Administration (EIA) estimates that oil production by OPEC+ members will fall by 340,000 barrels per day next year to 37.8 million barrels per day. On the exchange rate front, the rand is projected to continue its historical depreciating trend in 2024,” it said.

“The slow upward trend in our fuel price forecasts reflects the negative trend in rand futures being slightly steeper compared to the decline in oil price futures.”

Read: Here is the official petrol price for December

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