Experts said a fifth consecutive fuel price could be on the cards for October, with the current mid-month data indicating that the price could decrease by more than R1 a litre.
If this is accurate it would bring the fuel price to below R21 – its lowest level since early 2022.
Economists attribute the predicted drop to the lower international prices of Brent crude oil and a stronger rand.
South Africa has faced challenges of increasing fuel prices in the last two years, with the price reaching a high of R25 in October 2023.
Old Mutual Group chief economist Johann Els said the petrol price seems to be headed to a R1.20 to R1.30 decrease in October.
“The rand has been strong and stable but more importantly the price of Brent Crude has dropped from 80 dollars a barrel a month ago and currently sits at about 72 dollars a week, which is still good. The stronger rand and lower oil price have led to significant over recoveries in the petrol price.”
Els said the combined rand/oil price has fallen 10.5% from the end of August until now.
“So the daily over-recoveries on the petrol price sit at 128 cents a litre and the average sits at 115 cents a litre, which indicates that there could be a large petrol price decrease in October. I also expect inflation to remain at 4.6% when CPI is announced this week.
“We should see a 25 basis point interest rate cut this week and should expect inflation to fall further due to the petrol price decrease expected in October.”
Professor Irrshad Kaseeram of the University of Zululand’s economics department said China’s economy showed further weakening in July, which was noticed in their reduced demand for fuel.
“Additionally, the weaker employment data in the US raised fears of an impending recession. These two events pushed oil prices down. Moreover, the rand has been trading between R18 and R17.70 to the dollar, which is below the level a year ago of 18.93.”
Kaseeram added that there has been an over-recovery of both petrol and diesel costs in excess of R1.20 on average and for these reasons, a cut in fuel prices of around R1 is expected.
Waldo Krugell, an economics professor at North-West University, said given the crude oil price and rand/dollar exchange rate, further price cuts are expected. “The estimates are around R1.30 for petrol and around R1 for diesel. This will be further good news for the inflation rate as well.”
Economist Dawie Roodt said that he does expect the fuel price to drop in October but would not speculate on the amount he expected it to drop by.
“The fuel drop will be mostly because of the current rand exchange rate.”
Professor Bonke Dumisa, an independent economic analyst, said on Friday the rand opened significantly stronger at R17.74 against the US dollar.
“The international Brent crude oil price per barrel was relatively higher at $72.32 compared to the recent price of $71.66, which is still good. On Thursday we will celebrate a repo rate cut and on October 2 we will celebrate massive cuts in the diesel and petrol prices.”
The Mercury