South African motorists could get petrol price relief in November: economist

South African motorists could see some relief at the pumps next month, according to economist Mike Schussler, who says that the petrol price could drop by as much as 20 cents per litre.

“Small but good news: SA may just get some petrol price relief in November. Petrol should decline by about 10-20 cents but diesel may still increase.

“At least it’s not another increase in petrol, which should help the pocket a teensy little bit. Perhaps even more relief for Christmas,” he said.

A drop in the petrol price in November would make it a first breather for motorists since April 2018, which saw the start of consecutive monthly increases that have led to record highs.

Mid-month analysis by the Automobile Association showed a bleak outlook for November, with the group predicting a 40 cents-a-litre increase for both grades of petrol, while diesel and illuminating paraffin were expected spike by 70 cents and 65 cents respectively.

However, more recent data published by the Central Energy Fund show prices reversing significantly, drawing back to a 10 cents per litre increase for petrol and a 44 cents per litre increase for diesel as at 19 October.

According to Schussler, this trend is likely to continue into November, benefiting from lower oil prices and a stronger rand.

These are the expected prices for November (inland), based on the CEF data:

The petrol price is largely determined by the cost of international petroleum prices (which are driven in large part by the changes in international oil prices), as well as the rand/dollar exchange rate.

International crude oil prices have come down over the past week, pulling below $80 a barrel at the close on Friday, 19 October, from close to $87 earlier in the month.

The rand meanwhile, has strengthened in recent weeks, following the appointment of a new finance minister. The Medium-Term Budget Policy Statement (MTBPS) on Wednesday (24 October), will provide further direction for the local unit before the end of the month, however.

While markets have given Tito Mboweni a warm welcome to the role, analysts are not expecting any major deviation from the budget goals outlined earlier in 2018, which were guided under former minister Nhlanhla Nene.

South Africa’s treasury has the unenviable task of filling a R50 billion hole in the budget.

“There’s really no doubt that this year’s budget will contain a lot of bad news — the only real question is how bad,” said John Ashbourne, an economist at Capital Economics.

“Mboweni will prioritise holding to the deficit target, but this will require painful cuts. There isn’t, frankly, a lot of money available.”

Read: Here is the expected petrol price for November