South Africa is set for another petrol price cut in July, with petrol prices set to come down by over R1 per litre and diesel by between 48 cents and 55 cents per litre.
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This is according to data from the Central Energy Fund (CEF), which tracks the movement in the price of oil and the rand-dollar exchange rate to calculate the expected fuel price.
Motorists experienced a significant cut in prices at the beginning of this month, with prices coming down sharply across all grades of fuel.
‘Petrol prices came down by R1.24 per litre and between R1.09 and R1.19 per litre for diesel.’
This was largely due to the strong performance of the rand due to financial markets reacting positively to a coalition between the ANC and the DA.
The local currency was also boosted by positive economic data coming out of China, which, as the largest consumer of commodities, has a significant impact on the prices of raw materials.
This translates into rand strength as South Africa’s foreign exchange earnings will be boosted by increased demand.
The reasons for a potential cut in fuel prices in July are the complete opposite, with the rand weakening slightly on the back of political uncertainty.
‘So far in June, the price of oil has declined to $82 per barrel due to reduced demand as economic activity in developed markets is expected to slow.’
This has resulted in the CEF pencilling in the below cuts to the price of the various types of fuel in South Africa next month:
- Petrol 93: decrease of R1.18 per litre
- Petrol 95: decrease of R1.12 per litre
- Diesel 0.05% (wholesale): decrease of 55 cents per litre
- Diesel 0.005% (wholesale): decrease of 49 cents per litre
These decreases may not be long-lived as demand for oil is expected to recover as the northern hemisphere moves into summer and residents begin to drive more.
Further shocks are expected to come from conflict in the Middle East, and oil producers will maintain their production cuts for longer to artificially raise the price of oil.
‘The International Energy Agency has flagged a major surplus this decade as the shift away from fossil fuels accelerates.’
Oil-producing nations (OPEC+) have not been keen on this. The grouping has in the past moved to artificially inflate prices when risks of big drops have become apparent.
Russia announced this week it would be cutting production by an additional 400 000 barrels on top of the 500 000 it has already committed to cutting.
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Picture: Sharon Seretlo / Gallo Images
