Fuel Price Decrease: Only now, or forever?

Since most South Africans cry into their hands when filling up at their local garage, the Department of Energy’s announcement that petrol prices will be going down on Wednesday, is welcome news. The reduction we can expect, is a smile-inducing 51 cents per litre, across all grades. However, analysts say we shouldn’t break out the champagne and order naturally aspirated sports cars too soon. According to the CEO of Debt Rescue, Neil Roets, other negative economic indicators point to future price increases.

So what can we expect to pay, given the decrease? If you live in Gauteng, a litre of 95 Octane petrol will cost you R 13.26 instead of R 13.77. Diesel (0.5 %) will be down by 74 cents (0.05 %) and ultra-low sulphur diesel (0.005%) will decrease by 76 cents per litre. Paraffin will cost a whole 93 cents per litre less, and gas 89 cents per kg.

According to Mr Roets, a decrease may be very temporary, due to the Rand being pounded and because it is over ten percent weaker against the dollar since the beginning of the year.

As Mr Roets says: “It is belt-tightening time for the storm that might hit us later this year, as there is almost certainly going to be another interest rate hike. It is also a given that if the Rand keeps trading at its current level, we are going to be looking at a substantial fuel price increase next month.” However, the daily over-recovery on the petrol price at the end of July was a hefty 82c/l, which means that another decline in the petrol price in September, isn’t unrealistic.

Brent crude oil is currently under 50 USD per barrel, which brings relief to South Africans suffering under the high cost of living and interest rates that continue to spike.

Opec, the group of oil-producing companies, is of the opinion that fuel prices should recover come December. Fluctuating oil prices should stabilize in 2016, as a bigger global demand is on the cards. Still, one has to wonder, as the large companies of the world go greener, how this will impact the demand. But for now, let’s open a few beers to celebrate, if not the champagne. And pray that the Rand doesn’t weaken any further

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