Petrol price set for a big drop next week

South Africans can look forward to cheaper fuel prices in February thanks to a strong rand performance in January, which has offset a stronger crude oil price, the Automobile Association (AA) said on Monday.

“International (fuel) prices have risen by around 11%  in a streak starting on 14 December 2017,” the AA said, commenting on unaudited month-end fuel price data released by the Central Energy Fund.

“Fortunately for South Africans, the rand/US dollar exchange rate has enjoyed a strengthening trend for almost as long, with the local currency accelerating its gains since the middle of January,” it said.

The stronger rand means petrol is set to drop by 32 cents a litre at month end, with diesel down by 17 cents, and illuminating paraffin by 20 cents.

“It is important for political leaders to note the strengthening effect the recent more hands-on governance approach has had on our exchange rate, reducing many input costs for both businesses and private citizens,” the AA said.

“However, at the same time, we re-iterate our concern that government should avoid using the fuel levy to fund fiscal shortfalls, as it is a concentrated tax with rapid effects on inflation and disposable incomes.”

Reviewing the fuel price history during 2017, the association said the year saw some of the highest fuel prices in the country’s history.

“If one graphs the exchange rate, it is inescapable that almost all sudden movements are associated with political events. We appeal to government to take a more judicious approach to policy and governance in future, as rand weakness affects poorer people disproportionately,” the AA said.

It noted that 2017 commenced with petrol at R12.85 a litre and diesel at R11.02, with a slight climb into March followed by a decline.

By December 2017, petrol reached an all-time record high of R14.76 a litre.

Here are the expected adjustments (inland prices)

Fuel January official February expected
93 Petrol R14.20 R13.88
95 Petrol R14.42 R14.10
0.05% Diesel (wholesale) R12.74 R12.57

 Read: Prepare for a hefty hike in the fuel levy

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Petrol price set for a big drop next week