Retreating oil prices have painted a rosier picture for South African fuel users than has been the case for much of 2019. This is according to the unaudited mid-month fuel price data released by the Central Energy Fund.
At this stage of the month, we are predicting a decrease of 91 cents/litre to the petrol to the petrol price, 70 cents to the diesel price, and 62 cents to illuminating paraffin.
The story of the month is definitely oil. Crude laboured above $70 a barrel for large portions of April and May, as the tug-of-war continued between the OPEC countries, which favour ongoing output restrictions, and the USA, where production is steaming ahead. There had been a remarkable drop in the price of oil since the end of May, with the commodity currently trading around $61 dollars a barrel.
South Africans are not getting full value though, thanks to Rand jitters in the wake of the ANC top leadership trading jibes over the future of the Reserve Bank. After a period of sustained price stability, the Rand weakened substantially against the US dollar, taking some of the shine off oil’s retreat.
The expected price drops are nonetheless substantial, with petrol showing a 91 cent-a-litre drop at month end, with reductions of 70 cents and 62 cents respectively for diesel and illuminating paraffin.
If stability returns to the Rand and oil settles at its lower level, there might yet be more good news in the pipeline. A lot will rely on politicians exercising restraint in their public statements. We urge government to decide on its economic policy clearly and unambiguously in private, before articulating it in public where investors are watching.
By Tom Head for The South African
Has Santa Clause been listening to the South African public? A petrol price decrease of epic proportions is now certifiably on the cards for December, after the Central Energy Fund (CEF) released a new round of data.
Last week, we broke the news that the petrol price was likely to drop by more than R1.50 per litre. However, that figure may be nearer the R2 mark by the beginning of next month. Business Tech report that the rand’s gains against the dollar have propelled the costs into more affordable territory.
How much will the petrol price drop by?
All figures based on price per litre:
- Petrol 95: R1.67
- Petrol 93: R1.64
- Diesel: R1.14
- Illuminating Paraffin: R1.05
It’s been a hectic couple of months for the crude oil market, but one’s misfortune is another’s gain. The price for a barrel of oil has slumped to the $60 mark, compared with $85 in September. Donald Trump, this tweeter-in-chief, has even suggested oil prices could drop lower than this.
“The main driver of lower prices has been an accelerating decline in international oil prices, which have trended downwards since the beginning of this month,” said the Central Energy Fund in an official statement.
A perfect storm of positive factors for South Africa is leading us towards one of the most dramatic changes in monthly petrol prices ever seen in this country. It would be the ideal remedy to a year that has been infamous for soaring fuel costs, and October’s R1-per-litre increase.
It all makes for a pretty rosy picture heading into the end of 2018. Inland regions, such as Gauteng and Free State, will go from paying over R17 a litre to less than R15.50. Meanwhile, those near the coast will smash the R15 barrier altogether, as prices plummet even further.
What South Africans will pay for petrol in December 2018 – forecast:
- Inland: R15.41
- Coastal regions: R14.82
South Africans must expect another substantial petrol price increase at the beginning of November‚ the Automobile Association (AA) says.
Commenting on unaudited mid-month fuel price data released by the Central Energy Fund‚ the AA said: “International oil prices remain stubbornly high and it is possible that current tensions involving Saudi Arabia‚ one of the world’s biggest oil producers‚ could place more pressure on fuel prices. More welcome news is that the rand is working in SA’s favour‚ and the recent firming of our currency against the dollar has taken some of the bite out of oil’s rally.”
“However‚ the potential price hikes are still daunting‚ especially for diesel users,” the AA said.
Petrol prices are currently set for a 40c a litre increase‚ while diesel and illuminating paraffin could spike 70c and 65c a litre, respectively‚ the AA said.
The association said the predicted increase in the price of petrol must‚ for the moment‚ be seen against the backdrop of the department of energy’s proposal to set a maximum price for the sale of 93 octane unleaded petrol (ULP) and lead-replacement petrol (LRP) fuels.
“Should this happen‚ it will allow fuel retailers to set their own prices below the maximum amount indicated by government‚ and may‚ depending on the margins‚ ease the burden on users of the two identified fuels. It must be stressed‚ however‚ that we did not participate in the drafting of the proposal‚ so details on its possible implementation remain unclear to us‚” the AA commented.
However‚ the association said it welcomed the government’s efforts to tackle rising fuel prices‚ and that the department of energy had requested input from industry stakeholders. It said the proposal looked to be consumer-friendly‚ and that the detail would clarify how this would work once all the feedback was received.
The AA said the country could not continue to be hammered by large fuel price hikes without severe economic knock-on effects. Earlier in October, the price of unleaded 93 petrol increased by 99c a litre‚ unleaded 95 by R1 and diesel by R1.24.
“The effect on bus and taxi operations could lead to fare hikes that exceed commuters’ ability to pay‚” the AA noted. “We again call on government to prioritise economic policies that inspire investor confidence. A stronger and more stable rand is the country’s only defence against the vagaries of the international oil price.”