Business Maverick

WELCOME DROP

Fuel price decrease comes just in time for school holidays

Fuel price decrease comes just in time for school holidays
A worker refuels a vehicle at a Fuel1 gas station in Cape Town, South Africa, on 23 March 2022. (Photo: Dwayne Senior / Bloomberg via Getty Images)

Petrol, diesel, paraffin and LP gas are all cheaper this month as winter sets in.

With the winter school holidays around the corner and a weak economy, consumers will welcome the price drop of more than a rand per litre of fuel.

Every drop counts: from midnight on Tuesday, the price of both 93 and 95-octane unleaded petrol will drop by R1.24 a litre, diesel by between R1.09 and R1.19 a litre, illuminating paraffin by between 80c and R1.07 a litre and LP gas by R1.35 a kilogram.

The Central Energy Fund, which issues the price changes on behalf of the Department of Mineral Resources and Energy, attributes the reduction in price to a decrease in the average international product prices of petrol, diesel and illuminating paraffin, and the strengthening of the rand against the dollar. 

Annabel Bishop, the chief economist at Investec, said the rand’s strength over May contributed about a third towards the fuel price reduction, with the other two-thirds coming from the decline in international oil and petroleum product prices.

“Lower oil and petroleum product prices are positive for inflation — and so consumers in South Africa — and also have a moderating effect on the inflation forecast, which can be positive for interest rates by bringing repo rate cuts into an earlier period.”

The Organisation of the Petroleum Exporting Countries and its allies (Opec+) on Sunday said it had extended production cuts announced last year into 2025.

It would also extend the cut of 1.65 million barrels per day, which it announced in April 2023, until the end of 2025. In addition, it is extending a cut of 2.2 million barrels per day, announced in November, until the end of September this year, before it is “gradually phased out on a monthly basis” by the end of September 2025,  CNN reported.

That cut, CNN said, was announced as the group — led by Saudi Arabia and Russia — tried to counter slowing demand and rising output from the US.

The price reduction has been welcomed by the South African Petroleum Retailers Association. 

Lebo Ramolahloane, the vice-chairperson of the association, said petroleum retailers anticipated increased sales as fuel prices dropped, with more motorists visiting fuel stations, providing an opportunity for retailers to showcase additional services. 

The reduction in the fuel price will also affect the price of goods and other consumer products, especially food. Ramolahloane said the price drop would help reduce overall inflation by decreasing transportation and production costs, leading to more stable prices. 

Increased consumer spending boosts economic activity, contributing to higher GDP growth. Businesses, including retailers, benefit from this uptick in economic activity. DM

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