By Nicolette Dirk
Motorists could have reason to celebrate this weekend with a 25c drop in the petrol price predicted for tomorrow (Friday 27 September).
Economist Dawie Roodt said depending on the price of crude oil and the rand/US Dollar exchange rate, the price of petrol could drop by about 13 cents a litre in October.
“The reason for this is the drop in oil price and the rand faring better on the market. The petrol price is always volatile, but thanks to the drop in the oil price and a well-behaved rand, it could remain stable for the next year,” said Roodt.
Earlier this month, consumers experienced a small relief when the petrol price went down by five cents a litre, pushing prices to down to R13.50 a litre.
At the time, economists were not optimistic about a further price drop in October. Standard Bank chief economist, Goolam Balim, told sabc.co.za that if the rand weakened further, fuel price increases in October could be steep.
He predicted that petrol and diesel could rise by at least 50 cents at the beginning of October as a consequence of the elevated oil price and the generally weaker Rand should tensions in Syria escalate.
How things stand now
Econometrix economist, Laura Campbell, explained that at the beginning of September, US president, Barack Obama, decided to defer to Congress on whether or not to take military action against Syria for its use of chemical weapons.
“At the time, this move relieved some of the downward pressure on the rand and upward pressure on the oil price, thereby providing the first signs that domestic consumers could be in for a petrol price cut on 2 October.
However, as the month has progressed, the appreciation of the rand against the Dollar, to an average of around R9.96 in the month to date, from an average of almost R10.10 is expected to be the main driver of the expected cut in the petrol price in October,” said Campbell.
She added that this is because the average price of Brent crude oil has gone upward slightly, to almost $112.00 per bbl in September from an average of $110.50 in August.
The appreciation of the rand exchange rate since 18 September has been driven by the US Federal Reserve’s decision not to taper off its policy of quantitative easing.
Quantitative easing is the US’s central bank’s program of buying bonds from other member banks. The purpose of this monetary policy is to lower interest rates.
“Risk appetite improved and money flowed once again into emerging markets including South Africa. Nonetheless, it is plausible that ongoing strike activity in the domestic economy in September has prevented the rand from strengthening further,” said Campbell.
What does this mean for consumers?
With all these factors considered, Campbell said the petrol price looks set to decline by 25c per litre on 2 October, providing some financial relief to households that have been coming under increased pressure in recent months.
“Although the Consumer Price Index (CPI) rate increased in August to its highest level in almost five years, the CPI inflation rate is expected to decline back to within the 3% to 6% target by October.
The petrol inflation rate is set to decline to 8.8% in October, from 12.8% in September and a recent high point of 23.0% in August. Therefore, purely on account of changes in the petrol inflation rate, the CPI inflation rate should decline by 0.8%, to 5.6% in October,” said Campbell.