Good news about South Africa’s petrol price

The latest Central Energy Fund data shows South Africans can expect a price cut for all fuel grades next month.

Although it is likely to be a small reduction, measured in cents rather than rands, it is still a positive development for South African motorists.

Last week, only petrol 93, petrol 95, and 0.05% sulphur content diesel were lined up for price cuts.

However, a weaker oil price and a relatively stable rand have now added 0.005% diesel to the list of possible cuts.

The Central Energy Fund’s data predicts the price cuts below for fuel in South Africa.

• Petrol 93: decrease of 5 cents per litre
• Petrol 95: decrease of 9 cents per litre
• Diesel 0.05% (wholesale): decrease of 16 cents per litre
• Diesel 0.005% (wholesale): decrease of 3 cents per litre
• Illuminating paraffin: decrease of 10 cents per litre

It should be noted that things can change should there be a significant oil price increase or rand weakness.

This could result in an increase in petrol prices next month. However, the inverse can also happen, which will be further good news for motorists.

The rand has strengthened somewhat since the Central Energy Fund’s data was collected, which is a positive sign.

Oil prices have also cooled to just over $82 a barrel – a better position than the $85 a barrel range seen throughout most of the month.

According to Bloomberg analysis, oil prices have been trading within a narrow range this month, with the $82 a barrel mark leaving prices little changed for the week.

The relative stability comes as traders assess lower US stockpiles and weakness in Chinese demand.

The rand has been volatile over the last few months, driven by domestic political developments and international forces.

Investec chief economist Annabel Bishop said the approaching interest rate cut cycle has played a pivotal role.

“The rand has weakened to R18.53/USD since the MPC meeting, from R18.04/USD before the meeting, as markets have now fully factored in an interest rate cut for September,” she said.

“Interest rate cuts in South Africa reduce the return on rand deposits, and the comparative return on hard currency similar assets is impacted.”

“That is, the interest rate cut cycle starting in South Africa and the US at the same time would negatively impact the rand.”

Further good news for petrol prices

The expected petrol price cuts in August followed an announcement by President Cyril Ramaphosa that they will assess other means to cut fuel prices.

South Africa’s Government of National Unity (GNU) is set to review the petrol price formula, promising lower prices at the pump.

Ramaphosa announced that the fuel price formula will be reviewed to identify where prices can be reduced.

He said one of the key priorities of the Government of National Unity (GNU) is to tackle poverty and the high cost of living.

“An effective, integrated, and comprehensive poverty alleviation strategy is necessary to protect and support society’s most vulnerable,” he said.

“We will undertake a comprehensive review of administered prices, including the fuel price formula, to identify areas where prices can be reduced.”

Currently, taxes account for R6.18 of the price of a litre of petrol and R6.06 of the price of a litre of diesel.

These are only the taxes levied by the National Treasury, which include the General Fuel Levy, Road Accident Fund (RAF) Levy, and a carbon tax.

The Department of Mineral and Petroleum Resources enforces additional levies, such as the slate levy and petroleum products levy.

This means that R6.40 per litre of petrol goes towards paying taxes and levies – over 25% of the total price for fuel at the pump.

Fuel levies rose faster than inflation in South Africa, significantly contributing to the increase in fuel prices in recent years.

Should this be addressed, motorists could benefit from paying less for petrol and diesel at the pump.

However, experts warned that South Africans should not expect it to happen quickly, as fuel taxes are an important revenue stream for the government.