“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,” says Eqstra Fleet Management (EFM) MD Murray Price.
In its review of fuel prices over the past few months, EFM established that the 2014 fuel price has bucked historical trends, and that the increase during the current financial year will only be in the order of 10%.
Over the past five years, there has 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,” says 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 is largely due to the drop in global crude oil prices, which have 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 the Petroleum Exporting Countries will reduce output significantly to artificially increase the price,” says Price.
He says the production of crude oil is deemed feasible if a minimum price of $80 to $90 a barrel is on the table.
Another key element in fuel pricing is 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 has been R10.50.
The current exchange rate is R11.08 to the dollar.
This is significantly higher than the average rate of R7.85 over the last ten years, says Price.
The correlation between the rand and fuel prices shows 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 urges fleet managers to consider using more fuel-efficient models, implement measures that will manage driver behaviour and reduce speeding, and curb private mileage by employees.
Fuel now accounts for between 42% and 48% of overall fleet expenditure, notes Price.