Diesel shock likely in August as Middle East tensions lift oil prices

What the numbers show

Central Energy Fund month-end data currently points to an unchanged price for 95 Unleaded and a five cent decrease for 93 Unleaded when August adjustments are announced.

Diesel customers face a much steeper change: the data indicates increases of between R1.75 per litre for 50ppm and R1.91 per litre for 500ppm.

The Slate Levy wildcard

The Slate Levy, which compensates fuel companies for prior-month oil price volatility, is currently set at R1.14 per litre. A significant reduction in the levy could allow for a more substantial petrol price cut, but any decrease is not guaranteed because the levy exists to offset oil-price swings.

Official announcement and recent price movements

The Department of Mineral and Petroleum Resources will publish the official petrol and diesel price adjustments early next week.

For context, current retail and wholesale prices cited in the data are:

• 95 Unleaded: R25.23 per litre at the coast; R26.11 per litre in Gauteng.
• 93 Unleaded: R25.94 per litre in Gauteng.
• 500ppm diesel (wholesale): R23.91 per litre at the coast; R24.78 inland.
• 50ppm diesel (wholesale): R24.41 per litre at the coast; R25.16 inland.

These figures follow substantial reductions earlier this month: petrol fell by R2.01 per litre and diesel fell by between R3.14 and R3.58 per litre.

Why oil prices have been volatile

International oil markets swung this month as traders alternated between fears of a Middle East supply shock and hopes for diplomatic restraint. Prices began the month at around $72 per barrel, climbed above $100 per barrel amid an escalation that included the US and Iran exchanging fire and concerns over flows through the Strait of Hormuz, then eased to around $88 per barrel after a single-session drop of more than 8%.

Looking ahead

With the resumption of hostilities in the Middle East driving recent market swings, the data suggests it may be some time before petrol and diesel prices return to the levels seen before the sharp rises in April and May.