16 August 2023
By: Liana Mocke
Producers are advised to stock up on diesel before the inevitable price increase at the beginning of September.
Dawie Maree, head of information and marketing at FNB Agriculture, says the diesel price could rise by more than R2.50/litre if the exchange rate and international oil prices continue their current trends.
“The under-recovery on Monday afternoon, August 14, averaged R2.59/l on diesel,” says Maree. The average under-recovery for petrol was R1.35/l.
Oil prices, the exchange rate and events in the international economy play the biggest roles in the expected price movements, says Maree.
“The price of Brent crude oil has risen recently and is now around $85/barrel. About 17c/l of the under-recovery can be attributed to the exchange rate impact.”
Fuel prices also increased on August 2, when the Department of Mineral Resources & Energy said the 37c/l petrol hike was due to pricier Brent crude oil, which had climbed from $75.10/barrel to $79.75.
The rand
Maree says things could still change before the next price announcement, but the rand would have to strengthen significantly in the next two weeks. “This is highly unlikely, but if it does happen we can still expect an increase of R2/l in the diesel price.”
The only thing that could potentially mitigate the price increase is the Chinese economy. “It appears that there is a slowdown, which could reduce the demand for oil, but even if it happens soon it won’t make a significant difference in fuel prices for at least this month.”
He says it’s difficult to advise producers. “Farmers have already done so much to produce as efficiently as possible. Precision farming technologies, diesel savings, new equipment and tractors already help manage their diesel consumption. So, there’s actually very little that farmers can do at this stage to shield themselves from the expected price shock.”
Maree suggests ordering diesel in large quantities ahead of time. “Unfortunately, there’s not much more. Farmers can’t necessarily use less diesel because production must be sustained. In the end, farmers will absorb this price shock, and profitability could be adversely affected.”
