Another massive petrol price drop expected

Petrol prices could drop by as much as R1 in February, according to economist Mike Schussler, following a continued drop in global oil prices.

The latest update from the Central Energy Fund (13 January 2015), shows that there is a current over-recovery of 112 cents per litre on 93 octane petrol and 110 cents for 95 octane.

Diesel shows an over-recovery of 109 cents.

These figures point to an easy R1.00 drop in the petrol price next month, provided the rand and oil prices remain at current levels.

“It seems the oil price collapse is just continuing, and the effect will be another big decrease in the petrol price next month which will save the economy much money,” Schussler told BusinessTech.

“It also seems the bottom for oil prices could be below $40 a barrel for Brent – and that means the price would have fallen by nearly two thirds. That has not happened in our working lifetime, ever.”

Schussler echoed sentiments expressed by investment strategist at Brenthurst Wealth, Magnus Heystek, saying that the continued drop in oil has given South Africa and much of the world “a very lucky break”.

According to Schussler, the fuel price reprieve will help the country’s GDP growth by between 2% and 2.5%, as the oil import bill will decline and consumers will have more money in their pockets to spend on other things.

Inflation would be much lower, the South African current account deficit would be lower, and retail sales and other service would also benefit.

“More money will stay in SA and that will also help the Rand somewhat,” the economist said.

“Some industries such as Trucking and Air Transport will see increases in activity and they will save hugely, as will farmers and the chemical industry. All round, this is good news for SA.”

However, Schussler noted that there was one big problem that could put a damper on all the benefits: Eskom.

“Just the power crisis could destroy this,” he said.

Looking at the longer term, Schussler believes that fuel price in coming months will be the lowest we’ll see in 2015.

“I suspect that oil will stabilise at some point and that February price could be a low for the year (or maybe March), but taxes will be increased and it will go back to, say, R12 per litre,” he said.

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