It may come as little relief right now with South Africa’s population of 59 million under a Covid-19 lockdown, but motorists will see a record drop in fuel prices on Wednesday.
Minister of Mineral and Energy Resources Gwede Mantashe said in a statement on Friday that all grades of fuel, including petrol, diesel, illuminating paraffin and liquified petroleum gas (LPG) will drop from April 1.
According to the Central Energy Fund, in Gauteng (and inland provinces) the retail price of petrol (both 93 ULP and LRP) will decrease by R1.76 per litre (176.00 c/l), while both 95 ULP and LRP petrol will decrease by R1.88 per litre (188.00 c/l).
In the coastal provinces, 93 ULP and LRP petrol will drop by R1.82 per litre, while 95 ULP & LRP petrol will decrease by R1.94 per litre.
The wholesale price of diesel (0.05% sulphur) will decrease by 133.70 cents per litre in Gauteng and by 139.80 cents per litre at the coast. Diesel (0.005% sulphur) will decrease by 134.70 cents per litre in Gauteng and by 140.80 cents per litre at the coast.
The wholesale price of illuminating paraffin decreases by 183.90 cents per litre in Gauteng, while at the coast it will decrease by 197.80 a litre. This will see the single maximum national retail price of illuminating paraffin countrywide decrease by a massive 245 cents per litre.
Meanwhile, the retail price for LPG will see the biggest decline of 378.00 cents per kilogram countrywide.
The significant decreases in fuel prices come despite a depreciating rand; as well as the annual budget-related increases in the fuel levy (up 16 cents per litre) and Road Accident Fund levy (up 9 cents) that were announced by Finance Minister Tito Mboweni in February. These levy increases traditionally come into effect in April.
The huge fuel price drop is largely due to a record fall in the global oil price to around $35 a barrel on the back of the spat between oil heavyweights Saudi Arabia and Russia, as well as reduced demand due to the Covid-19 outbreak.
Mantashe noted in his statement that the average Brent Crude oil price decreased from $55.95 to $35.25 per barrel during the period under review. He was diplomatic in his statement saying that “a failure by Opec to agree on production cuts exacerbated the pressure on the price of crude oil”.
The minister said the main reason for the lower oil price “is due to the continuous spread of the Covid-19 even in countries outside of China. This has added to investor and traveller concerns and as a result affected the demand for crude oil”.
He noted that the rand depreciated against the US dollar from R14.97 on average to R16.43 during the period under review when compared to the previous one. This led to higher contributions to the basic prices of petrol, diesel and illuminating paraffin of between 40 cents and 46.62 cents per litre.
The depreciation of the rand was however offset by the huge decline in global Brent Crude oil prices. The slide in the global oil price continued on Monday morning, touching a low of around $20 a barrel.
If it stays at this level, South Africa’s hard-pressed consumers and businesses will be inline for another massive fuel price drop in May. However, the rand has also depreciated further to around R18 to the US dollar following Moody’s decision to lower South Africa’s credit rating to sub-investment grade or “junk” status on Friday evening.
A further depreciation of the rand could wipe out further fuel price decreases and possibly even result in an increase in fuel. An increase in the global oil price will also see fuel price increases.