Fuel price pain for South Africans in January by Bianke Neethling

[Nat Quinn]

The Department of Petroleum and Mineral Resources has released the official fuel price adjustments effective from Wednesday, 1 January 2025.

A combination of rising global petrol prices and a weaker rand in December compared to November has resulted in an under-recovery, leading to increased fuel costs.

This marks the second consecutive month of price hikes. Here are the price adjustments for January:

• Petrol 93 – increase of 19 cents per litre

• Petrol 95 – increase of 12 cents per litre

• Diesel 0.05% – increase of 7.50 cents per litre

• Diesel 0.005% – increase of 10.50 cents per litre

The Central Energy Fund (CEF) reported that international petrol prices increased during the review period, while prices for diesel and illuminating paraffin declined.

In addition, the rand weakened against the US dollar during the period under review, with an average exchange rate of R18.11/USD compared to R17.93/USD in the previous period.

This depreciation contributed to higher basic fuel prices.

The Self-Adjusting Slate Levy Mechanism will maintain the Slate Levy on petrol and diesel at 0.00 cents/litre, effective 1 January 2025.

Despite some decreases, such as the drop in illuminating paraffin prices, motorists and consumers will face higher costs for most fuel products heading into the new year.

This pain is set to continue in the first few months of 2025, as the Organisation for Petroleum Exporting Countries (OPEC) has delayed its plans to increase oil output by three months and will not fully unwind its production cuts until the end of 2026.

This is set to put upward pressure on oil prices throughout 2025 and 2026, with any potential supply shock having significant consequences.

There had been talk of OPEC completely removing its supply cuts at its latest meeting, but this did not materialise.

Saudi Arabia, in particular, had been expected to push for the removal of the supply cuts as it has been steadily losing market share to other producers.

OPEC’s influence over the supply of oil has been steadily eroded in recent years, with increased production in the US and Brazil diluting the impact of its members on the broader market.

However, the organisation’s members still pump around half of the world’s oil, and it plays a vital role in balancing supply and demand.

Despite the group’s supply cuts, global oil benchmark Brent crude has mostly stayed in a $70 to $80 per barrel range this year. On Thursday, it traded near $71 a barrel, having hit a 2024 low below $69 in September.

OPEC’s continued supply cuts prevent any likelihood of oversupply in the coming years, with its members looking to keep the oil price stable and high enough to boost their state finances.

The organisation’s members are holding back 5.86 million barrels per day of output, or about 5.7% of global demand, in a series of steps agreed since 2022 to support the market, Bloomberg reported.

The steps include cuts of 2 million bpd by the whole group, 1.65 million bpd of first stage of voluntary cuts by eight members and another 2.2 million of second stage of voluntary cuts by the same eight members.

At the end of 2024, OPEC+, which includes Russia, agreed to extend the 2 million bpd and the 1.65 million bpd of cuts until the end of 2026 from the end of 2025.

According to Reuters calculations, the gradual unwinding of 2.2 million cuts will start in April 2025 with monthly increases of 138,000 bpd and last 18 months until September 2026.

The group had previously planned to unwind the 2.2 million cut over 12 months through monthly output increases of 180,000 bpd.

OPEC+ also agreed to allow the United Arab Emirates to raise output by 300,000 bpd gradually from April until the end of September 2026, instead of the earlier plan to start it in January 2025.

The extension of these cuts will keep the oil supply tight and make the market increasingly vulnerable to an external shock as there is no excess production from the group to provide a buffer.

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