South African consumers can breathe a sigh of relief with the 70c a litre petrol and 50c a litre diesel decrease predicted by economists for next month
The decrease comes after 81c a litre increase in March followed by a further 12c a litre increase that pushed the petrol price up to R13 a litre.
According to Econometrix economist, Laura Campbell, The United States’ weakened economy has contributed to a decrease in oil consumption, leading to the decrease in petrol price.
“Because the United States is the biggest consumer of oil it affected the global oil price but it does pose concern for the effect it will have on the oil demand,” said Campbell.
Reports state the price of Brent crude dropped to a year low of $98 (R897,27) a barrel on Tuesday, while the most actively traded oil futures contract, the Western Texas Intermediate, fell to a one-year low of $86.06 (787,95) a barrel. Brent crude has traded at an average $111.45 (R1 018,84) a barrel since the beginning of the year, down from an average $119(R1 089) a barrel for January to mid-April last year.
Another contributing factor to the petrol price decrease was the Chinese gross domestic product growth, which Laura described as “lower than expected”. China is the world’s second-biggest economy and grew by only 7,7% in the first quarter which was slower than the 7,9 growth experienced in the fourth quarter of 2012. Campbell said the slight strengthening of the rand in April also helped decrease the petrol price.
What can consumers look forward to?
South Africa’s economy relies a lot on transport and AA Spokesperson, Gary Ronald said the petrol price decrease will save commuters a few hundred rands and the effect on the transport industry will also decrease the inflation rate. He added that even though commodities (like food prices) might not decrease in the next eight weeks, it will not go up either.
Campbell added that because fuel makes up 5,68% of the consumer price index, there will be a 0.5% decrease in inflation. The petrol inflation rate is expected to take a further sharp dip from 10,2% in April to 1,8 % in May. Campbell attributed May 2012’s 28c increase in petrol to the sharp inflation rate decline expected this year.
“South Africans can see further cuts in the petrol price for the next two months if the price of oil continues to go down,” said Campbell.
Even though economists predict a further cut in June this price relief for now is viewed as a temporary state of affairs because the US economy could strengthen and bring with it a demand for oil and push up the price again.