Since August last year motorists have been enjoying a steady decrease in petrol prices. Many motorists are saving about R3 per litre of petrol. The petrol price is to be reduced by 93 cents a litre today (Wednesday 4 February 2015) and the diesel price by an even greater R1.02 per litre, said the Department of Energy (DoE).
The expected petrol price reduction this month means that since August last year, petrol has come down by R4,02 a litre. That is a 28.1% drop.
The end of decreases
It appears as though the decrease in fuel prices will come to an end this month, said Jammine.
"This means that if oil prices were to remain where they are and the Rand/Dollar exchange rate were also to remain at current levels, we could be faced with an increase in the fuel price of 27 cents per litre at the beginning of March," said Jammine.
Rand/Dollar exchange rate
"However, in recent weeks, such [Brent crude oil] prices have stabilised, while conversely the Rand/Dollar exchange rate has depreciated," said Dr Azar Jammine, chief economist at Econometrix.
The DoE agreed with this saying that the weakening of the Rand against the US Dollar increased the contribution to the Basic Fuels Price on petrol, diesel and illuminating paraffin.
Jammine believes that the petrol price decrease would have been greater if it were not for the Rand/Dollar exchange rate.
"In fact, the price of petrol would have been reduced even more had it not been for a marginal weakening of the Rand/Dollar exchange rate over the course of January, to an average of R11.5777, compared with R11.4749 in December," said Jammine.
Tax increases
Jammine believes that there is a reason why inflation prices might not decline to the anticipated extent.
"As we have recommended on previous occasions, the government may decide to extract the additional tax revenue it needs in order to reduce next year's budget deficit, from the fuel levy," said Jammine.
Jammine went on to explain that the government stands to raise the full R12 billion in additional tax revenue that it needs by increasing the fuel levy and the petrol price by 56 cents a litre over and above the inflation-linked 11 cents per litre increase that would normally have been in place.
"The resultant 67 cents per litre increase in the petrol price would raise the Consumer Price Index (CPI) inflation rate by about 0.3%, which we believe the authorities would find preferable to raising personal tax rates or the rate of VAT," explained Jammine.