SA petrol price to decline by a massive 69c/l in September and could decline by a further 55c/l in October

On Friday, 28 August 2015, the Department of Energy announced that the petrol price (95 and 93 ULP & LRP) will decrease by a substantial 69c/l with effect from Wednesday, 2 September 2015. This means that the price of 95 Octane (ULP, Gauteng) will now cost R12.57 per litre, following a decline of 51c/l in August. The price of diesel will decrease by 54c/l and 51c/l (0.005% and 0.05), while the price of paraffin will decline by 55c/l (retail price), and gas by 115c/kg.

During the fuel price review period, from 31 July 2015 to 27 August 2015, the average Rand/US Dollar exchange rate weakened from R12.41 (in the previous review period) to R12.86. The weakening of the Rand against the US Dollar increased the contribution to the Basic Fuel Price on petrol by a substantial 20.45c/l. Fortunately, this was more than offset by the sharp decline in the international oil price. The decline in the oil price subtracted 93.59c/l from the Basic Fuel Price. The net effect is a decrease of 73c/l in the petrol price, but this was reduced to 69c/l as a result of 4.6c/l increase in the retail margin.

Encouragingly, the daily over recovery on the petrol price on 26 August 2015 was a massive 128c/l. This means that at this stage it is entirely possible that the petrol will decline again in October 2015, and possibly by as much as 55c/l. Clearly, though a lot can happen to the exchange rate and oil price in a month.

The petrol price decrease in September 2015 will reduce the monthly consumer inflation rate by a very significant 0.3 percentage points, which will help the Reserve Bank to leave interest rates changed for the remainder of the year. Since the peak in April 2014, the petrol price has now declined by total of R1.82/l or 12.6%. Unfortunately, other cost pressures are still likely to push SA consumer inflation over 6% in early 2016. These include electricity, water, education and insurance fees. In other words, most households will find themselves having to re-direct any savings on fuel into paying for higher electricity, water and other household expenses.

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