Petrol price to decrease – but by how much?
With the oil price tumbling over the past few weeks, and the rand strengthening against the dollar, the possibility of a big decrease in the petrol price looked promising. But then things did an about turn.
Next week’s expected petrol price decrease of R2.60 is fast becoming a pipe dream after the tumbling oil price made a U-turn and recovered from previous lows. The rand also lost ground against the dollar.
The cost of fuel in South Africa is largely influenced by the international price of crude oil and the R/$ exchange rate.
A price cut of around R2.28 on 95-octane unleaded petrol seems to be more realistic, says Dr Roelof Botha, economic adviser to the Optimum Financial Services Group. The price of 93-octane unleaded petrol will probably cost around R2.12 per litre less. The word on diesel and illuminating paraffin is that it will be reduced by more than R1 per litre.
The fuel prices for September will be announced next week.
In March, just after Russia invaded Ukraine, the oil price hit a high of $123 per barrel, but nosedived to $92 earlier in August. Concerns about a weakening world economy and a possible new nuclear deal between Iran and the West were the impetus behind the crash. This set the scene for a sharp decline in fuel prices.
But in the meantime, oil prices have accelerated to more than R$100 per barrel after the Organisation of the Petroleum Exporting Countries (OPEC) warned it wants to cut production.
According to Botha, this is nothing more than a strategy by OPEC to regulate the price. He says the downward trend in the oil price will continue.
The rand also came under pressure as the USA wants to hike interest rates. This caused the rand to crash to R17 against the dollar, before recovering slightly.
“Many South Africans make the mistake of thinking the rand’s performance against the dollar is an indicator of how bad the South African economy is, but it actually indicates how strong the dollar is,” says Botha.
“A stronger dollar has other benefits, like better export prices,” he adds.
According to Botha, food prices will also benefit from the expected lower fuel prices.
WATCH: Izak du Plessis chats to economist Roelof Botha about what South Africans can expect to pay at the petrol pumps in September.
Read original story on zululandobserver.co.za
