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Petrol price bonanza set to continue

No end in sight for oil supply glut says economist Mike Schüssler.

When the petrol price drops by a record R1.27 per litre on Wednesday, South Africans will have had their fuel bill significantly lessened, after a cumulative decrease of R3.13 since August last year. For an average car with a 50-litre tank, that amounts to R156.50 saved on each full tank. And, according to Mike Schüssler, an economist at economists.co.za, there’s likely to be at least one more reduction before the petrol price bonanza is over.

The Department of Energy announced on Friday that, as of Wednesday, petrol will decrease to R11.20 per litre for inland 95 octane (R10.79 per litre for coastal) and R11.02 for 93 Octane.

Diesel will decrease by R1.05 per litre, while Illuminating paraffin (SMNRP) will decrease by R1.44 per litre and liquefied petroleum gas (LPG) will decrease by R2.10 kilogram.

“It looks like there is going to be yet another (fuel price) drop in on the cards in February. It won’t be as big as the January reduction but I think it will go down by 20c or 25c,” says Schüssler, who believes that prices won’t start to rise again for at least another year.

With the global oil-price hitting five-and-a-half-year lows at less than $55 per barrel on Monday, basic economics dictates that supply should start to taper off as fewer oil producers fail to generate sustainable profits, and that should in turn lead to prices increasing once again. However, Schüssler says that process will take much longer than one would typically expect. Firstly, it will take a while before the oil in the already over-supplied market is used up. Secondly, oil-rich countries like Iraq and Russia are still able to generate profits at current prices, albeit at much higher production levels.

Source: www.infomine.com

“…this will likely lead to the oil price dropping even lower. Ultimately, this stems from that fact that America now has enough energy. Instead of being a big importer of energy, the world’s biggest economy in the world is now becoming an exporter of energy…that alone has changed the equation quite significantly,” says Schüssler, referring to the impact that America’s shale gas output has had on the global economy wherein the world’s top petroleum exporters, Saudi Arabia and other Gulf producers, have declined cutting oil production.

This all bodes very well for SA drivers who, Schüssler says, will have R450 more in their pockets on average than they would have done fewer than five months ago. Had it not been for the depreciating rand, we might have seen up to a R5 cumulative decrease in the oil price during the past few months, he says.

Business owners will also be celebrating their declining transport costs, but according to Gerhard Papenfus, CEO of the National Employers Association of South Africa, it won’t mean much else.

“The problem is that there is still a lot of uncertainty. The oil price is going in a direction that we all appreciate but nobody knows what’s going to happen in the long term. Employers have more money in the pocket now, but they won’t be thinking about expanding or doing anything else that they otherwise wouldn’t have done,” says Papenfus.

Goods and foods are unlikely to become cheaper. But Papenfus feels that the current fuel price reprieve would enable employers to absorb inflationary price increases planned for the year ahead, meaning that, at the very least, consumers may avoid price increases.

PETROL – Pump price

Date

Coastal

Inland

95 EPU/LRP

Change

93 EPU/LRP

Change

95 EPU*

Change

03 December 2014

R12.06

669c

R12.29

645c

R12.47

669c

05 November 2014

R12.75

645c

R12.98

645c

R13.16

645c

01 October 2014

R13.20

65c

R13.43

52c

R13.61

65c

03 September 2014

R13.25

667c

R13.41

667c

R13.66

667c

06 August 2014

R13.92

0c

R14.08

0c

R14.33

0c

02 July 2014

R13.92

531c

R14.08

529c

R14.33

529c

04 June 2014

R13.61

622c

R13.79

622c

R14.02

622c

07 May 2014

R13.83

615c

R14.04

615c

R14.24

615c

02 April 2014

R13.98

53c

R14.16

55c

R14.39

57c

05 March 2014

R13.95

536c

R14.11

536c

R14.32

536c

05 February 2014

R13.59

539c

R13.75

538c

R13.96

538c

01 January 2014

R13.20

538c

R13.36

538c

R13.57

538c

Source: Engen

DIESEL – List price

Date

Coastal

Inland

0.05% Sulphur

0.005% Sulphur

0.05% Sulphur

0.005% Sulphur

03 December 2014

1101.49c

1106.89c

1132.09c

1137.49c

05 November 2014

1154.79c

1161.19c

1185.39c

1191.79c

01 October 2014

1215.79c

1221.19c

1246.39c

1251.79c

03 September 2014

1259.39c

1264.79c

1228.79c

1234.19c

06 August 2014

1254.17c

1258.57c

1284.77c

1289.17c

02 July 2014

1259.79c

1263.19c

1290.39c

1293.79c

04 June 2014

1245.79c

1249.19c

1276.39c

1279.79c

07 May 2014

1269.37c

1274.77c

1299.97c

1305.37c

02 April 2014

1299.15c

1304.55c

1329.75c

1335.15c

05 March 2014

1311.95c

1316.35c

1338.55c

1342.95c

05 February 2014

1284.75c

1288.15c

1311.35c

1314.75c

01 January 2014

1260.55c

1263.95c

1287.15c

1290.55c

Source: Engen

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