SA fuel prices set for another huge decrease
In May petrol is expected to be nearly R4 a litre lower than pre-lockdown
When South Africans come out of lockdown at the end of April, the petrol price could be nearly R4 a litre lower than when they went in.
Following a record fuel price reduction in March, SA looks set for a second month of sharp price decreases, says the AA, quoting mid-month data from the Central Energy Fund (CEF) which shows petrol down by R1.89 a litre, illuminating paraffin dropping by R1.88 and diesel by R1.17.
The AA says that even the rand's drastic decline against the US dollar since March has not been enough to offset the steep reduction in oil prices. The price of Brent crude is currently at about $28 per barrel from $68 at the start of January, and down from $34 at the beginning of April.
“The rand has gone from an average exchange rate against the dollar of R15.65 in early March to its current level of around R18.25. In any other circumstances, a crash of 17% in six weeks would see South Africans facing a massive fuel price hike. Instead, we are set for another large drop,” says an AA spokesperson.
The factors that initially touched off the plunge in oil prices before the Covid-19 pandemic placed much of the world in lockdown, had now been resolved, he said.
“The spat between Russia and Saudi Arabia has ended with an agreement, which is expected to see global oil production reduced by nearly 10-million barrels a day in a bid to support oil prices. However, it may be a case of too little, too late,” says the AA.
“World commerce has all but collapsed in the wake of the Covid-19 pandemic. Even assuming a fairly rapid end to the pandemic, it will take many months for the global economy to work up a new head of steam, and possibly years before it returns to pre-Covid-19 levels. Absent further shocks, we expect it to be a long while before substantial oil price hikes are a reality,” says the Association.
SA's fuel prices are adjusted on a monthly basis, informed by international and local factors. Despite the increase in the Fuel and Road Accident Fund Levies by 16.0cpl and 9.0cpl, respectively, the fuel price dropped from R15.84 to R13.96 (95 unleaded, inland) on April 1. Based on the latest CEF data it could be down to R12.07 per litre in May, a two-month decrease of R3.77.
Over the same period the wholesale price of diesel (50ppm, inland) would be down R2.50.
However, the AA notes that the market remains highly volatile and cautions that these figures could be very different by month end.