News Room

Petrol Price Drop Expected For December

Author: Jason Snyman
Date: 2018-11-16
The Automobile Association has predicted a significant drop in the fuel price, and it'll be just in time for the festive season.

After months of continuous, unrelenting pressure on the fuel price, motorists are finally set for some relief come December.  

Thanks to an accelerated decline in the global crude oil price (dipping below $70 to $67 per barrel) and a modest improvement in the Rand / US Dollar exchange rate, the Automobile Association has predicted a significant decrease in the fuel price.

Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions, said:

While there is little momentum to really act as a catalyst for further rand strength, the currency has been able to outperform other emerging market currencies.

The AA Predicts A Massive Drop In The Fuel Price

Christmas could come early this year for South African motorists. According to unaudited mid-month data by the Central Energy Fund, the price of petrol could possibly drop by as much as R1.51 and R1.54 for 93 and 95 octane, respectively, as well as a drop of 92c on the price of diesel and 85c on the price of illuminating paraffin. 

Fuel users will receive a substantial breather at the end of November going into December if the current fuel price trends continue,” said the AA

This may come as great news to many, but the association added that the Department of Energy had recently reintroduced the use of the slate levy to manage price changes, which could possibly affect the final figure.

November saw petrol prices showing an over recovery of 22 cents. The government, however, absorbed the price drop through a slate levy to balance the country’s slate account.

Fuel users should also bear in mind that recent oil production cuts by Saudi Arabia could result in supply restrictions as we move into 2019, pushing prices higher,” said the AA. “While the current fuel-price picture is the rosiest it has been for several months, caution should remain the watchword.

Hopefully market conditions will remain stable for the remainder of November, just in time for a pleasant festive season. The Department of Energy, unfortunately, has final say on the petrol price movements, and will announce the official changes at the end of November.

Petrol Price Cap

News on the proposed 93 octane petrol price cap, as announced by Minister of Energy, Jeff Radebe, has been relatively slow. At the end of October, Radebe said that the proposal for the cap has been circulated to wholesale fuel and retail industries, who will provide feedback on it.

“Before the end of January 2019 there will be a proposal on the table,” said Radebe speaking during a Q&A session in parliament in early November.

Though it will undoubtedly alleviate some pressure on consumers, this may not work exactly like we think it would. The idea behind setting the price of 93 octane petrol is to boost competition among retailers – who can offer the best price on petrol – and in doing so, ease pressure to import 95 unleaded petrol to meet the growing demand, and have a positive effect on the trade balance.

The Fuel Retailers Association, however, which represents over 2 500 fuel retailers, isn’t very happy about the proposal. The association claims that it will cut into paper-thin profit margins and accelerate job losses in the sector.

Fuel Retailers Association CEO Reggie Sibiya, said: 

Every time the department seeks solutions, the target is always the path of least resistance — small businesses. They seem to shy away from attacking the giants, the oil companies or look at their own contribution [in terms of taxes and levies] to the fuel price structure

Regarding job losses due to loss in profit, Sibiya continued:

If every service station reduced their staff by four each at 5,000 service stations, we are looking at 20,000 job losses.