Oil cushions motorists from bigger petrol price hike

The Department of Energy on Friday announced that the pump price of all grades of petrol will increase by 6c/l with effect from 3 February 2016. The increase is mainly due to tightness in the market because some major refineries in the US were on unplanned shutdown, the department said, adding that the weakening of the rand against the US dollar contributed massively to the current fuel price adjustment.

The Automobile Association said it was only oil's ongoing lower price that protected South African motorists against the rand rout.

If the rate had held to its January 1 level, petrol would have dropped by up to 43c a litre.

The AA said the weak oil price means South African motorists have yet to be exposed to the full effect of the rand's slump. 

"If the oil price turns the corner without some recovery from the rand, substantial fuel price increases are likely," it warned.

The average rand/dollar exchange rate for the period 31 December 2015 to 28 January 2016 was R16.3276 compared with R14.8819 in the previous period.

The average exchange rate used in the fuel price calculation is approximately 25% lower than at the same time last year, the AA said.

This currency slump increased the contribution to the Basic Fuels Price on petrol, diesel and illuminating paraffin by 49.43/l, 37.85c/l and 38.88c/l respectively.
The wholesale price of diesel, 0.05% sulphur and 0.005% sulphur, will decrease by 62c/l and 63c/l respectively and the wholesale price of illuminating paraffin will decrease by 59c/l.

The single maximum national retail price (SMNRP) will decrease by 79c/l , while the maximum retail price of liquid petroleum gas (LPGas) will increase by 1c/kg.

The department said the main reason for the decrease in diesel and paraffin prices is the oversupply of middle distillates such as diesel and illuminating paraffin in the global market.

This is mainly due to the fact that the Northern Hemisphere experienced mild winter season compared to previous periods.

China contributed to the situation by exporting diesel into the market.

Source: Fin24