Murray Price
“Based on the information available to us at present, we would strongly recommend that fleet managers budget for a 12% to 13% increase in fuel [prices] for 2015,” said Eqstra Fleet Management (EFM) MD Murray Price on Monday.
In its review of fuel prices over the past few months, EFM had established that the 2014 fuel price had bucked historical trends, and that the increase during the current financial year would only be in the order of 10%.
Over the past five years, there had been an increase in the fuel price of more than 14% year-on-year.
“In 2014 we saw the fuel price increase to over R14 per litre, with the highest cost of R14.39 (Unleaded 95, Reef) in April this year,” said Price.
“However, as of November 5, the price of fuel will be down to R13.16 for unleaded 95 on the Reef, while the wholesale price of diesel will be R12.31.
“This is nearly 9% lower than the April high.”
This reduction in fuel prices was largely due to the drop in global crude oil prices, which had softened from $115 a barrel in April, to the current $86 a barrel – the lowest in four years.
“This reduction is fuelling speculation that the Organisation of Petroleum Exporting Countries will reduce output significantly to artificially increase the price,” said Price.
He said the production of crude oil was deemed feasible if a minimum price of $80 to $90 a barrel was on the table.
Another key element in fuel pricing was the strength of the rand, with forecasts for the South African currency to continue weakening against the US dollar.
The average rand/dollar exchange rate over the last 12 months was R10.50.
The current exchange rate is R11.08 to the dollar.
This was significantly higher than the average rate over the last ten years of R7.85, said Price.
The correlation between the rand and fuel prices showed up starkly when considering the last five years, when fuel prices increased, on average, 14% a year, while the rand weakened, on average, 10% year-on-year against the dollar.
In light of this, Eqstra urged fleet managers to consider using more fuel-efficient models, implementing measures that would manage driver behaviour and reduce speeding, and to curb private mileage by employees.
Fuel now accounted for between 42% and 48% of overall fleet expenditure, noted Price.