Big petrol price cuts coming next week

South Africa is set for huge fuel price cuts next week. Petrol is expected to be cut by R1 per litre, and diesel, depending on the grade, will be cut by between 90 and 100 cents per litre. 

This is according to month-end data from the Central Energy Fund, which showed an overrecovery in the price of petrol and diesel during May. 

The price of petrol and diesel have risen steadily since the end of the pandemic-era lockdowns, rising by over 50% in the past two years. 

At the beginning of May, petrol prices rose while diesel prices slightly decreased due to lower demand for the fuel. 

These are the expected changes –

• Petrol 93: decrease of 100 cents per litre
• Petrol 95:decrease of 100 cents per litre
• Diesel 0.05% (wholesale): decrease of 101 cents per litre
• Diesel 0.005% (wholesale): decrease of 92 cents per litre

The overrecovery in the price of petrol and diesel for June is largely due to the strengthening of the rand versus the dollar. 

Oil prices over the last month have been relatively flat, rising only 0.43%, while the rand has strengthened around 4.5% versus the dollar. 

The rand has strengthened on the back of reduced load-shedding, boosting the economic prospects of South Africa. 

Positive news around the country’s national election has also enhanced the performance of the currency. 

Stanlib chief economist Kevin Lings said good economic data out of China has also supported the rand’s rally in recent weeks. 

“It’s not as if China is doing fantastically well,” Lings said. “It’s just that at the end of last year, China seemed to be in significant trouble, but during the course of this year, they’ve initiated a number of reforms.”

The Chinese Communist Party’s reforms have made investors more confident in the world’s second-largest economy. 

Importantly, these reforms have also stimulated economic activity in China. As the world’s largest consumer of commodities, this has boosted the prices of raw materials. 

South Africa is still largely seen as a commodity-dependent economy and the rand a commodity-dependent currency. 

Thus, increased demand for the country’s commodities has boosted the currency as investors expect improved economic growth and foreign exchange earnings.