The Automobile Association (AA) says the outlook for petrol prices in South Africa is positive, with the potential for another price drop in September – if current conditions persist.
Petrol prices will be coming down by R1.32 per litre on Wednesday (3 August), with diesel prices dropping slightly less by between 88 and 91 cents per litre.
The main factor driving the petrol price drop is the declining oil price, which fell from around $110 a barrel at the start of July to $100 a barrel by the end of the month. However, despite the drop, the weakening rand versus the US dollar kept local prices under pressure.
The August price reduction would have also been over R2, had it not been for the government’s fuel levy intervention terminating, adding 75 cents per litre back to the price.
Looking to the month ahead, prospects for petrol prices look better – even though it is far too soon to tell. Oil prices have dropped under $100 a barrel, and the rand has strengthened somewhat on a softer dollar.
Speaking to ENCA, AA spokesperson Layton Beard said that if oil prices hold a sustainable position under $100 a barrel, then it may indicate a downward trend.
Beard said that while the outlook is positive, a better, more accurate picture of where prices are going will be seen in the middle of the month. He added that it is difficult to determine because the factors that influence the fuel price are very volatile and can shift significantly over a week.
Beard said that the overall weakness of the rand vs the dollar offsets some of the gains from lower international oil prices.
This is how prices will reflect from Wednesday:
| Inland | July official | August Official |
|---|---|---|
| 95 Petrol | R26.74 | R25.42 |
| 93 Petrol | R26.31 | R24.99 |
| 0.05% diesel (wholesale) | R25.40 | R24.52 |
| 0.005% diesel (wholesale) | R25.53 | R24.62 |
| Illuminating Paraffin | R19.86 | R18.42 |
Fuel levy
The Department of Mineral Resources and Energy (DMRE) ended its fuel price interventions on Tuesday (2 August), taking the general fuel levy back to its pre-May 2022 prices.
There have been calls from various social groups and the opposition Democratic Alliance to scrap the fuel levy and other levies entirely to remove approximately R6 from the petrol price.
However, Beard warned that the scrapping of the general fuel levy would simply see the government finding other ways to tax motorists in the country.
He said that it would ultimately prove to be counterproductive and that a transparent wholesale review of the fuel price would bring the most reprieve to consumers.
Other interventions
After scrapping 10 cents per litre from the price of petrol 95 (inland) by removing a demand-side management levy, and cutting the basic fuel price by 3 cents per litre through revised calculations, the DMRE is also investigating other interventions.
This includes looking at partially deregulating the price of petrol 93 in the future, or introducing a fuel price cap, which would allow for fuel suppliers who are able, to pass the benefit to consumers.
According to Beard, a price cap would mean that retailers could not charge more than a certain amount for the product. This can already be seen with regard to diesel prices at petrol stations.
The chief executive officer of Debt Rescue, Neil Roets, said that although the government is commended for starting the process of introducing a price cap for 93 octane, the reality is that more need to be done.
He said that drawn-out plans that will probably be implemented only next year would be too late.
Roets added that the overall decrease in petrol prices for both 93 and 95 would make no real difference to those who have already absorbed the price hikes over the last year.
“Official statistics show an astronomical year-on-year increase of 38% from R18.11 on 4 August 2021 to R25.42 on 3 August 2022,” said Roets.
Read the full article here: https://bit.ly/3OWPsye