Johannesburg – A pending decrease in the price of fuel is good news for heavily indebted consumers, although the cheer may be short-lived, according to debt management company Debt Rescue.
CEO Neil Roets says consumers must be aware that other economic indicators remained largely negative.
“It is belt tightening time for the storm that might hit us later this year, as there is almost certainly going to be another interest rate hike. It is also a given that, if the rand keeps trading at its current level, we are going to be looking at a substantial fuel price increase next month[ September].”
According to the Central Energy Fund’s latest official update, the price of petrol could drop by 29c a litre from next Wednesday, after increasing on July 1 by between 41c and 44c.
The Department of Energy will announce the actual figure on Friday.
However, the Automobile Association of SA on Wednesday said the drop could be between 47 to 49 cents a litre, with diesel down by approximately 70 cents. Illuminating paraffin was also set for a drop of around 68 cents a litre.
The association bases this on unaudited data from the Central Energy Fund, and the lower oil price, which will not be offset by the weaker rand.
Brent crude oil this morning was selling at $53.31, down from around $60 a barrel a year ago. Meanwhile, the rand is currently trading at just below R13 to the US dollar, and has weakened in the past few days.
The AA noted the recent downward trend in international petroleum prices would require a substantial reversal to heavily impact South African fuel prices. “The short- to medium-term outlook for the fuel price is therefore likely to depend largely on the exchange rate.
Debt Rescue also cautions the decrease may be of a very temporary nature as the rand is taking a hammering, having decreased in value against the dollar by more than 10% since the beginning of the year. This past week alone it has dropped by more than 1.5%.
However, the diesel decline could spell good news. Roets noted “everything we consume is transported by trucks that guzzle vast amounts of diesel. If retailers play the game and pass on the reduced transportation costs we could be looking at a reduction in the price of food and most other goods.”
“It might even throw a lifeline to Eskom, who use large amounts of diesel to keep their gas turbine generators going to help fill the shortfall of electricity in the grid.
According to the Central Energy Fund’s latest update on the fuel price, dated Thursday, the South African government is over recovering 50.4c a litre on grade 95 unleaded petrol, and 52.56c on grade 93 unleaded petrol. In terms of diesel, this is being over recovered by between 75.69c a litre and 73.29c, depending on the sulphur level.
Currently, petrol costs either R13.77 or R13.52, depending on the grade.
The year began with a much lower petrol price in South Africa compared with 2014, but from April, consumers found themselves having to pay more for fuel and electricity, adding to inflation. The budget added more taxes for consumers in the form of increased levies for fuel and the Road Accident Fund.