R2.40
petrol price relief for South Africa

South African
motorists have experienced three consecutive months of petrol price cuts, almost
reverting back to the prices at the start of the year by dropping an
accumulative R2.38 since May.

On Monday (5
August), the Department of Petroleum and Mineral Resources noted that motorists
would see another cut at the pumps this month, with prices coming down by 15
cents per litre for petrol and between 17 and 28 cents per litre for diesel.

This welcome
relief is largely attributed to range-bound oil prices and a stronger
rand/dollar exchange rate, partly a consequence of the optimism surrounding the
newly established Government of National Unity.

The new
government’s political stability and positive economic outlook have bolstered
investor confidence, strengthening the rand against the dollar over the last
four months.

A stronger
local currency makes importing fuel cheaper, allowing for reduced prices at the
pump.

The
Department of Petroleum and Mineral Resources reported that the average price
of Brent Crude oil rose from $82.24 to $83.55 per barrel during the review
period.

This increase
was primarily due to a decrease in US inventories, reduced production from
Canada because of wildfires, tensions in the Middle East, and ongoing
production cuts by OPEC.

Additionally,
the average international prices for petrol increased slightly due to improved
summer seasonal demand in the Northern Hemisphere, while diesel and
illuminating paraffin prices decreased on average during the review period.

Despite this,
prices have fallen to R23.11 for petrol and R20.74 for diesel as of August.

Petrol
prices have dropped by R2.38 per litre from R25.49 per litre in May, and diesel by R1.88 per
litre from R22.62 per litre in March.

This relief
is substantial, as it has almost completely reversed most of the 2024
petrol price increases, which stood at R3 per litre from January to
May 2024.

This is also
true for diesel, as diesel price increases hit R2 per litre in March, the
highest since the start of the year.

Despite this positive development, it is essential to note that
South Africa’s fuel prices remain vulnerable to global crude oil prices and
exchange rate fluctuations.

The
international oil market is inherently volatile, influenced by geopolitical
tensions, supply chain disruptions, and changes in production levels by major
oil-producing countries.

These factors
can lead to abrupt changes in crude oil prices, directly impacting fuel costs
in South Africa.

Furthermore,
while the stronger rand provides temporary relief, it is not immune to
depreciation.

This was
noted on Monday (5 August) as the rand and the JSE followed global markets down
on Monday (5 August) after job numbers from the United States spooked investors
and analysts.

The rand
crumbled close to 2% in trade on Monday, hitting close to R18.70 to the dollar
in intraday trade.

This was a
result of the extension of last week’s losses amid fears of a US economic
slowdown, and the rand kicked off the week on the back foot as investors pulled
out of high-risk markets into safe havens.

Any future
weakening of the rand against the dollar would likely result in higher fuel
prices again.

Therefore,
while the current reduction in fuel prices is a significant respite for
consumers and businesses alike, it is crucial to remain cautious and prepared
for potential price volatility.

To illustrate
the relief in real terms, BusinessTech compared how much more you’re paying
depending on your car.

The average
petrol tank size for the top-selling vehicles in South Africa is 60.4 litres.

This means
the average South African driver saves R144 per tank by filling up with petrol
95 today compared to May (the peak of the price increases).

The table
below shows how much more car owners in South Africa have paid every time they
fill up with 95 unleaded petrol, based on their car type and tank size, since
the fuel price-cutting cycle started.

The changes
are detailed in the table below.

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