Motorists welcome 2015 petrol and diesel price drop

Motorists saw in 2015 with the welcome news that the price of petrol is to come down in the first week of January by R1,27 a litre while diesel is set to decrease by R1,05 per litre. The retail prices of both grades of petrol, and the wholesale prices of both grades of diesel will decrease with effect from Wednesday, 7 January, 2015 said the Department of Energy (DoE).
 
The DoE said that the main contributing factor to the fuel price decreases was the continual drop in the crude oil prices. Oil prices have steadily been dropping since June 2014.
 
"The petrol market is a supply and demand market. From our side we can see that the supply is not going down, so you sit with an oversupply. That is one of the reasons why the oil price is so low," said Marius Luyt, head of public affairs at the Automotive Association of South Africa.
 
Determining prices
 
Petrol prices are affected in two ways: the Brent crude oil price and the exchange rate. "The trend depends on the oil price on the market. That is your big trend, and then the exchange rate was in a narrow band the whole time," explained Luyt.
 
"The Brent oil price was very low over time. And then if you look at the Rand – Dollar exchange rate, there was a relief for us in that it didn't jump or spike very high, so if it goes up or higher it will push the petrol price up," said Luyt.
 
Rand-Dollar factor
 
Even though the international Brent crude oil market has enjoyed a 50% drop in prices, South Africa's decrease has not been that big.
 
Luyt said that this has to do with the Rand-Dollar exchange rate.
 
"Now if you look you will see that it is a drastic decrease in the prices, and they are saying figures of about 50%. The reason why we see only a 15% decrease in South Africa is because of the Rand-Dollar exchange rate. And that is why it is not a 50% downward trend on your oil price [like it is elsewhere in the world].
 
"So the major contributor here is your Rand-Dollar exchange rate. So if that gets better then we will score," said Luyt.
 
Luyt went on to say that they predict more petrol price decreases in the future, but it all depends on the how well the Rand does against the Dollar.
 
"You can't predict what is going to happen, but you can make an assumption and say that the Rand-Dollar exchange rate will not worsen that much, so in our prediction we can expect a downward trend in South Africa," said Luyt.
 
History of prices
 
Justmoney has tabled the petrol prices expected for Wednesday, 7 January and has compared it to the past five months. As the DoE highlighted, petrol prices have steadily been decreasing, with only a slight increase in October.
 
 
Source: Automobile Association of South Africa, prices correct as of January 5, 2015.
 
Justmoney has also tabled diesel prices, with the expected prices for Wednesday 7 January. Diesel has also seen a decrease over the past five months, with the biggest difference this month by R1,05.
 
 
Source: Automobile Association of South Africa, prices correct as of January 5, 2015.