Over R1 per litre petrol price cuts announced

The prices of petrol and diesel will come down by over R1 per litre across all grades on Wednesday, providing significant relief for South African motorists. 

These latest round of cuts follow four consecutive months of reductions and will be bring the price of fuel down to levels last seen in February 2022. 

The Department of Mineral Resources and Energy has confirmed the significant cuts to the price of petrol and diesel forecast by the Central Energy Fund (CEF) for October. 

These official changes will come into effect on Wednesday, 2 October, and are outlined below. 

• Petrol 93 – decrease of 106 cents per litre
• Petrol 95 – decrease of 114 cents per litre
• Diesel 0.05% – decrease of 114 cents per litre
• Diesel 0.005% – decrease of 112 cents per litre

From Wednesday, 95 unleaded petrol will now cost R21.05 a litre in Gauteng and R20.26 on the coast.

Wholesale Gauteng diesel prices will come down to R18.45 a litre on Wednesday and will be R17.66 on the coast.

The primary driver behind these cuts is the significantly stronger rand in September following interest rate cuts in the US, which typically weaken the dollar. 

This impact was compounded by the Reserve Bank cutting the repo rate by 25 basis points in South Africa, less than the 50 basis points the US Fed cut by. 

Although this difference is relatively small, it widens the interest rate differential between the two countries, making South African assets relatively more attractive to investors. 

The average rand-dollar exchange rate used by the department to calculate the retail price of fuel was R17.67/$ compared to R18.05/$ in the prior period. 

This led to a lower contribution to the Basic Fuel Prices of petrol, diesel and illuminating paraffin by 21.91 c/l, 22.33 c/l, and 22.44 c/l, respectively.

A stronger rand is crucial for lower petrol prices and lower inflation more generally, as it makes the import of products, such as oil, cheaper. 

Oil prices stayed relatively flat during September, only coming down by 1.9% for the month-to-date. 

This was despite increased tension in the Middle East, with fears of a regional war that would significantly disrupt oil production from key producers. 

The conflict in the region has gone on for nearly a year and has had no tangible impact on oil exports from the Middle East, meaning there has been little impact on the price of oil. 

Furthermore, fears of a US recession and a slowdown in China have hit demand expectations, putting further downward pressure on oil prices. 

This has been compounded by key producers, particularly Saudi Arabia, signalling its intention to remove production caps set by the Organisation for Petroleum Exporting Countries (OPEC) to regain market share.