South African motorists are likely to see another massive petrol price cut in May, mid-month data from the Central Energy Fund shows.
If current market conditions persist to the end of April, petrol prices could drop by between R1.81 and R1.89 per litre, while diesel could drop by between R1.14 and R1.17 per litre.
This would come after a record price drop in April, which saw per-litre prices fall by almost R2.00, despite a 25 cents per litre increase in fuel taxes which came into effect.
International petroleum product costs crumbled in March on the back of an oil price war in the OPEC regions, which saw the price of crude oil slip to as low as $28 a barrel.
Earlier this week, the OPEC region ended the war with a commitment to cut its output by a 23% – however, Saudi Arabia has used the opportunity to launch another price war, offering discounts to key markets.
This has kept oil prices under pressure, with international prices per barrel sticking under the $30 mark.
These developments reflect in the local petrol price calculation, and generally in the favour of motorists. International petroleum costs alone contribute to an over-recovery of as much as R2.20 in the South African petrol price (and R1.50 for diesel).
However, this is undercut by continued rand weakness against the dollar, which has also recently hit record levels.
While trading slightly stronger against the dollar than seen at the start of the month, the moving average of the rand versus the dollar exchange rate remains at some of the weakest levels seen on record.
The local currency is not only grappling with global uncertainty around the Covid-19 coronavirus – which has shut down markets and economies across the globe – it also has to contend with local issues, most notably South Africa losing its only investment grade rating by Moody’s, while being pushed further into junk by Fitch.
These downgrades come amid a 35-day lockdown which has put unprecedented strain on an economy already in technical recession.
Because of this, the rand has remained under pressure, trading on average at around R18.20 to the dollar, contributing to a 30 cents per litre and 43 cents per litre under-recovery in the petrol price and diesel price, respectively.
On balance, these are the expected changes:
- 95 Petrol: decrease of R1.89 per litre
- 93 Petrol: decrease of R1.81 per litre
- 0.05% diesel: decrease of R1.17 per litre
- 0.005% diesel: decrease of R1.14 per litre
- Illuminating Paraffin: decrease of R1.89 per litre
This how the latest data reflects in the current prices:
|Fuel (Inland)||April Official||May Expected|
|0.05% Diesel (wholesale)||R12.69||R11.52|
|0.005% Diesel (wholesale)||R12.73||R11.59|