Prices at the pumps are set to drop this coming Wednesday, 3 July, by around R1 per litre for petrol, while diesel is primed to go down by a maximum of 25c per litre.
Based on data from the Central Energy Fund, these expected adjustments are a result of a consistently appreciating rand/US dollar exchange rate during June and relatively stable international petroleum product prices.
Between 31 May and 27 June, the average rate at which the rand swapped hands with the US dollar dropped from around R18.80/dollar down to R18.30/dollar, which contributed to an over-recovery in all grades of petrol and diesel of between 1-2c/litre.
Simultaneously, one barrel of Brent Crude oil traded for US$81.62 on 31 May, falling to a low of US$77.52 by 4 June, and recovering to US$86.39 by the 27th.
These fluctuations led to lower average international petroleum product prices during June than the month that preceded it, which shaved another 94c-R1.00/litre from July’s predicted petrol prices and 18-24c/litre from the predicted diesel prices.
Based on these elements, fuel prices in South Africa on Wednesday are expected to be adjusted as follows:
- Petrol 93 – Decrease of R1.01 a litre
- Petrol 95 – Decrease of 95c a litre
- Diesel 0.05% – Decrease of 25c a litre
- Diesel 0.005% – Decrease of 19c a litre
It must be noted that these predictions are not the official changes that will be made by the Department of Energy for July, which may be higher or lower as they also take into account any potential changes in the Slate Levy, taxes, transport costs, or wholesale and retail margins.
While fuel prices are currently on a downtrend, the outlook for the next six months remains mixed.
Optimism over the so-called Government of National Unity (GNU) saw the rand gain purchasing power against the world’s strongest currencies in June, which benefited July’s incoming fuel price adjustments.
With the GNU now being established, investors have more surety over the South African market which is expected to bring further stability to the domestic currency and avoid significant fluctuations.
On the other side of the coin, Goldman Sachs expects oil consumption to rise during the second half of the year, primarily driven by increased economic activity in China and India, Daily Investor reports.
Similarly, statistics from the United States, the world’s largest oil consumer, indicate that consumption of petroleum products like petrol and diesel is already on the rise.
With increasing demand inevitably comes higher prices, which must be offset by a stronger rand to stave off any major adjustments at the pumps.
T
