Fuel Price Trends and Forecast- 2016 - Efm.co.za
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Passionate about delivering Measurable Value to our Customers
Fuel Price Trends and Forecast- 2016
White Paper – Updated April 2016
(For information purposes only)
The international Brent oil price experienced a significant
price decrease of 21% from $ 47.00 in December 2015 to
$ 36.92 in April 2016. This clearly shows a downward trend
for the commodity price over this period.
Taking into consideration that the fuel price in the country
is adjusted monthly, we experienced a decrease in the fuel
price twice on the 06 January 2016 and the 02 March 2016.
For the other 2 months, consumers have been hit hard by
fuel prices hikes. From 06 January 2016 to 06 April 2016, the
total change in the petrol and Diesel price will change by
R 0.53 and R 0.48.
The latest fuel price change will occur on Wednesday the
06 April 2016 for both petrol and Diesel. The reef petrol 95
1 will increase by 88c/l and the wholesale price of diesel,
0.005% sulphur, will increase by 98c/l. The main contributors
to the price change for South Africa are as follows:-
1. The increase in fuel levies as determined by the
Minister of Finance of 30c/l in his budget speech on
the 24 February 2016.
2. The transportation costs will increase by 5.2 c/l in
Gauteng resulting from the National Energy
Regulator of South Africa’s (Nersa) approved
pipeline tariff increase as well the road
transportation tariff increase obtained from the
Road Freight Association (RFA).
3. The average increase in the prices of petroleum
products in the international markets amounts to 52
c/l for petrol and 61 c/l for diesel respectively.
4. On average the Rand strengthened against the US
Dollar when compared to the previous period. The
average Rand/US Dollar exchange rate for the
period 26 February 2016 to 31 March 2016 was 15.46
compared to 15.78 during the previous period. The
strengthening of the Rand against the US Dollar
decreased the contribution to the Basic Fuels Price
on petrol, diesel by 11.30 c/l and 9.98 c/l.
(Department of energy, 2016)Passionate about delivering Measurable Value to our Customers
During the previous fuel price change in March 2016 local
Petrol prices decreased by 69c/l and Diesel prices
increased by 14 c/l.
In completing >90 detailed fleet reviews, our Eqstra Fleet
Consulting team has established that fuel now contributes
between 42% and 48% of overall corporate fleet
expenditure. This affirms fuel as the single biggest cost to
fleet controllers, and emphasises the importance of better
management of driver behaviour and better choice of
vehicles.
Figure 1: RSA Quarterly Fuel Price 2012 - 2016
RSA quarterly fuel price 2012-2016
R 16.00
R 14.00
R 12.00
R 10.00
R 8.00
R 6.00
R 4.00
R 2.00
R 0.00
2
Petrol Diesel Linear (Petrol) Linear (Diesel)
The petrol retail price in South Africa is regulated by
government, and adjusted every month on the first
Wednesday of the month. The Central Energy Fund (CEF)
calculates the new petrol price on behalf of the
Department of Energy (DOE). The petrol pump price is
composed of a number of price elements both
international and domestic.
Factors that affect the fuel price include:
The international element, or Basic Fuel price (BFP),
is based on what it would cost a South African
importer to purchase crude oil on the international
market and to transport the product onto South
African shores.
The domestic elements include different pricing
zone (magisterial district zones), certain domestic
transport costs, government import taxes and leviesPassionate about delivering Measurable Value to our Customers
and retail and wholesale margins which all need to
be added to the international price.
The exchange rate of the SA Rand to the US Dollar
- as crude oil is traded in US currency.
Figure 2: RSA Petrol Price (Reef) April 2009 – April 2016
RSA PETROL APRIL 2009 - APRIL 2016
R 16.00
R 14.00
R 12.00
R 10.00
R 8.00
R 6.00
R 4.00
R 2.00
R 0.00
2009 2010 2011 2012 2013 2014 2015 2016
Petrol R 7.38 R 8.58 R 9.96 R 11.94 R 13.20 R 14.39 R 12.89 R 12.62
Diesel R 6.58 R 7.54 R 9.54 R 10.94 R 12.02 R 13.35 R 11.29 R 10.59
3
Petrol Diesel Linear (Petrol) Linear (Diesel)
Figure 3: Brent Crude Oil Spot Price (04 April 2016)
Source: Nasdaq.comPassionate about delivering Measurable Value to our Customers
The current decrease in the International Brent crude oil
price is caused by number of factors such as Iran
increasing its oil production and subsequently its export in
order to regain its market position lost during its sanctions
period. Russia also reported its highest oil production in 30
years, and Saudi Arabia will not join the “freeze deal”.
(AMANDA COOPER, 2016)
One of the key pricing elements remains the strength of the
Rand - with forecasts for the South African Rand showing a
continuing weakening again the US Dollar. The average
South African Rand/US Dollar conversion rate over the last
12 months was R 13.80. The current exchange rate as at the
04 April 2016 is R 14.67 – when compared to the average
rate over the last 5 years (April 2011 – April 2016) amounted
to R 10.18.
According to the World Bank, by 2025, the Brent crude oil
is forecasted to reach $ 88.3. (Bank, 2015) Various analysts
and experts in the field believe that the trend in local petrol
prices could also end up on an upward trend for years to
come.
4
Figure 4: RSA Average Fuel Price per Year (Reef) 2009 – 2016
RSA AVERAGE FUEL PRICE 2009-2016
R 16.00
R 14.00
R 12.00
R 10.00
R 8.00
R 6.00
R 4.00
R 2.00
R 0.00
2009 2010 2011 2012 2013 2014 2015 2016
Petrol 95 R 7.40 R 8.26 R 9.97 R 11.56 R 12.84 R 13.82 R 12.37 R 12.29
Diesel 0.01% R 6.70 R 7.45 R 9.32 R 10.80 R 12.04 R 12.75 R 10.88 R 9.95Passionate about delivering Measurable Value to our Customers
The Outlook
Based on the historical data, and the external predictions
on both the Brent Crude and Rand pricing – we are revising
our April 2016 predictions and estimate that the average
increase for the 2016 year will be between 9-10%.
It is important to highlight that there are other factors that
are beyond the market’s control that will have a significant
impact on the fuel price which will affect the fuel
predictions. This prediction is based on the oil market
stabilising in 2016.
To place this in context, the average fleet vehicle
consumes approximately 5,000 litres per annum. With the
April 2016 fuel price of R 12.62, this would equate to an
annual cost of R63 100 per vehicle per annum. A 9%
increase would result in an annual increase of +/- R5 679 –
whereas a 10% increase would result in an annual fuel
increase per vehicle of +/- R6 310.
Recommendations
5 Based on the information available to us at date of print,
we would strongly recommend at least a 9 - 12% increase
is forecasted/ budgeted for 2016.
All rights reserved. The information contained in this document is confidential and has been prepared by EQSTRA
FLEET CONSULTING solely for information purposes to our strategic clients; it is not to be relied upon by any third party
without our prior written consent.
This report, whilst based on the most realistic information and proven statistical methodologies available to us at
publication and is intended to provide general information. It is not an exhaustive treatment of the subjects raised.
Accordingly, it should not be relied on to address specific situations or circumstances and is not a substitute for
accounting, tax, legal, or other professional advice.
Before making any decision or taking or refraining from any action which might affect your finances or business affairs,
or those of your employees, you should consult a qualified professional adviser to validate.
EQSTRA Fleet Consulting Email address: info@eqstrafleet.co.za 12 Corobrik Road, Meadowdale,
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