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PETROL PENNIES

Fuel price decrease: Don’t expect a knock-on effect on interest rates

(Photo: Gallo Images / OJ Koloti)

In early 2020, a typical sedan with a 37-litre fuel capacity required more than R400 to fill up on 95-octane petrol. In January 2022, almost two years since the start of the Covid-19 pandemic, this endeavour may exceed R700. However, due to the price decrease on Wednesday, this refuelling cost dipped below R700 – registering a small victory for South African motorists.

Minister of Mineral Resources and Energy Gwede Mantashe announced an adjustment of fuel prices, based on current local and international factors, with effect from Wednesday, according to his department. 

The factors include a reduced crude oil price and a positive shift in the rand/dollar exchange rate.

On Wednesday, 93-octane petrol declined by 71c per litre, and 95-octane by 68c/l, while 0.05% and 0.005% diesel dropped by 67.8c/l and 69,8c/l, respectively. 

South African interest rates 

Monthly fuel price fluctuations make it difficult to predict effects on interest rates, according to Iraj Abedian, founder and chief executive of Pan-African Investment and Research Services. 

“At the moment, [the fuel price] is elevated, and it will stay elevated because everything else is expensive,” Abedian said.  

The fuel price is contingent upon the international oil price, and foreign exchange rates, which together have consistently driven up interest rates in South Africa.

 All businesses suffer from fuel increases, but particularly the transport industry, which affects truck drivers and taxis.

Increasing inflation

The rise in global inflation, alongside impeded international trade, is exacerbating domestic inflation.

The South African government currently enforces a 35% fuel excise tax, according to Abedian.

“The government wants every penny it can get, but this decrease will not worry them too much,” he explained. BM/DM

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