Massive drop in petrol price

Cape Town - Cash-strapped consumers will get a breather at the pumps after the department of energy on Friday announced a drop in petrol and diesel prices.

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All grades of petrol and diesel will decrease on Wednesday September 3.

Petrol 95 and 93 (ULP and LRP) is coming down by 67 cents a litre (c/l).

The price of diesel with 0.05% sulphur will drop by 25.38 c/l and diesel with 0.005% sulphur will decrease by 24.38 c/l.

Illuminating paraffin (SMNRP) will fall by 25.0 c/l and liquefied Petroleum Gas (LPG) by 108.0 cents/kilogram.

The department has also decreased the slate levy from 4.38 c/l to zero, in line with the self-adjusting slate mechanism.

It is the third time this year that the petrol prices have decreased. The prices fell in June and just ahead of the general elections in May.

The department said the reasons for the fuel price decreases are mainly due to the drop in the price of crude oil and the stability of the rand against the US dollar.

Good news for consumers

Experts say the decline in the petrol price is good news for consumers.

Dawie Roodt, chief economist with the Efficient Group, told Fin24 the reduction is welcomed even though it is not much in comparison to a year ago.

"It will probably push inflation lower and result in a few more rands in the pockets of consumers."  

Economist Mike Schüssler, director at economists.co.za, concurred, adding that it could also halt a hike in interest rates.

"With really slow economic growth and consumers under pressure, the decrease comes at a time when this decline could really help the overall economy and particularly hard pressed middle class in SA," he told Fin24.

"We could well see inflation come back into the 3% to 6% range at least for a month or two which could delay interest rate hikes for a while", said Schüssler.

Debt specialist, Neil Roets, told Fin24 the price drop will bring much needed relief to motorists at the pumps, but it is no cause for celebration for the millions of over-indebted consumers

"It ... will only bring relief when they put petrol into their vehicles, but I do not think it will go further than that".

"Usually when the petrol price goes up, the cost of goods and services goes up in line with the price hike, but when the petrol price goes down, the cost of goods and services stays the same," he said.

South Africa's petrol price is directly linked to the price of petrol quoted in US dollars at petroleum export-orientated refining centres in the Mediterranean area, the Arab Gulf and Singapore.

This means the domestic price is influenced by international crude oil prices, international supply and demand balances for petroleum products and the rand/US dollar exchange rate.

Source: fin24.com