The Big Petrol Price Bonus

The price of 93-octane unleaded petrol will drop on Wednesday to its lowest level since August 2012‚ providing much needed relief to consumers facing a lean January after Christmas celebrations expenditure.

The main reason for the cheaper fuel is continuing weak global crude oil prices. A depreciation in the rand/ dollar exchange rate actually led to an increase in the basic fuel price of up to 19.75c/l‚ but this was offset by the fall in crude prices. The retail price of 93-octane petrol will drop by R1.27/l and the wholesale price of 0.005% sulphur diesel by R1.05/l.

The retail price of illuminating paraffin will decrease by R1.44/l and liquefied petroleum gas (LPG) by R2.10/kg. At R11.24/l for 95-unleaded in Gauteng‚ the price is only 20c higher than it was in August 2012. Diesel‚ at R10.28/l in Gauteng‚ will be only 3c higher than in August 2012.

Energy Minister Tina Joemat-Pettersson said the decrease would be a big relief to motorists and users of LPG and paraffin‚ in particular low-income households. Econometrix chief economist Azar Jammine said on Sunday the fuel price cut was favourable for consumers in the short term. But he warned that a dramatic rebound in the longer term could not be ruled out if the Organisation of the Petroleum Exporting Countries agreed to cut back output.

The latest reduction in the price of petrol would increase disposable incomes 0.5%‚ equivalent to R5 extra to spend on average for every R1‚000 that people earned‚ Dr Jammine said. The cumulative effect of petrol price cuts over recent months was a 1% gain in disposable incomes.

The effect would vary according to how much individuals spent on transport. “There would be an even bigger impact in the short term if retailers and other businesses that consume a lot of fuel were to pass on the benefits to consumers‚ but I would not hold my breath‚” Dr Jammine said.

“In the past two years those businesses have been negatively affected by the drop in the value of the rand on imported goods and have not passed that cost on to their customers. So they are likely to use the windfall provided by lower fuel prices to replenish their profit margins.” With inflation likely to fall below 5%‚ there would be no pressure on the Reserve Bank to increase interest rates.

In a report on the latest inflation figures released three weeks ago‚ Barclays said lower oil prices were likely to result in the headline consumer price index averaging 3.5% in the second quarter of this year from 5.8% in November. But core inflation was “stickier” and would “grind down slowly” from 6% in January over the coming months. In the longer term‚ the effect on the economy was mixed because the same factors contributing to lower oil prices were hitting commodity prices‚ Dr Jammine said.

The November trade figures released by the South African Revenue Service last week showed that even as SA’s oil imports dropped by more than R9bn‚ earnings from exports of minerals‚ transport and machinery also fell sharply.

Several African countries that had provided growing markets for South African exports were also oil producers‚ Dr Jammine said. The lower oil price could affect the “Africa Rising” story.

-Charlotte Mathews