Economists have forecast a further steep petrol price hike in April but have allayed fears that it is likely to soar to R40 as one analyst had suggested in a recent media report.
JSE-listed Efficient Group chief economist and director, Dawie Roodt, told Freight News on Monday that while “anything is possible” there would have to be “some serious distortions” in the oil price and global economy for it to reach R40 a litre.
Roodt was reacting to concerns raised by University of South Africa Professor Emeritus of International Law, André Thomashausen, who recently said petrol prices could reach this level if Russia’s war on Ukraine intensified.
Thomashausen said there would be a price explosion in energy markets if Russian gas supplies shifted away from Europe to China, which was welcoming large low-priced liquid natural gas supplies to reduce dependency on coal for better CO₂ reduction targets.
“Gas prices in the EU could increase tenfold. This would provoke a price explosion for energy from other sources as all producers would adjust to the gas price levels.
“A huge jump in profits for the US-based producers of gas from fracking could be expected, and this is what the US is hoping for,” said Thomashausen.
“In as much as energy prices in the EU would jump up, international energy prices would follow.
“In a worst-case scenario, South Africa could expect liquid fuel prices to increase to about R40 per litre. As Eskom energy production depends much on imported diesel, electricity prices could increase by up to 40%,” Thomashausen told IOL.
However, Roodt said on Monday that this scenario was unlikely.
“Anything is possible, but for the petrol price to go to R40 a litre we need the price of oil to be approximately more than $200 a barrel or we need the rand at approximately R30 to the dollar.
“For the oil price to go to $200 you would need some serious distortions,” Roodt said. “The West is speaking to Venezuela and even to Iran to get oil, so I don’t think oil will go to $200.”
He said the price of Brent Crude oil, which was trading at around $128 a barrel at the time of writing, would require “some serious distortions” to remain sustainably above $150 for an extended period of time.
“I can see it spike but I can’t see it staying above $150 for a long time. Oil will hover at these levels for a little while but I can’t see it staying at these levels for too long.”
Roodt said soaring commodity prices were currently supporting the rand, and if the oil price surged further, this would propel the price of gold and platinum to benefit the rand.
“As things stand at the moment we are probably going to see about a R2 to R2.50 petrol price increase in a month or two,” said Roodt.
Stellenbosch University’s Bureau for Economic Research has also indicated a price hike of around R2 or more over the next month or two.
“The local impact of the extraordinary oil price gains is reflected in the daily over-recovery figures for the SA petrol price from the Department of Minerals and Energy. At this stage, it is signalling that domestic fuel prices could increase by as much as R2 per litre in April,” the Bureau said.
“Depending on oil price moves in the rest of the month, the increase could be significantly more than R2 per litre. This follows a hefty petrol price hike of about R1.50/litre in March.
“Reports over the weekend of ‘active discussions’ between the US and European partners about a ban on Russian oil imports pushed oil prices up significantly further in Asian trade this morning,” the Bureau added.
