PETROL PRICE – Contributing Factors
Springtime Good News
Spring is in the air and time to hit the road and enjoy the warmer weather. What better news to receive than the petrol price going down by 5.2%! After the significant fuel price increase during the past winter, South Africans can celebrate a lower petrol price of 69 cents per litre to R12.57 for 95 unleaded petrol in Gauteng, while diesel now costs R10.40 per litre for 0.5% diesel, 51 cents less. This accounts for a total retail petrol price decrease of 95 cents since 1July this year, offering great relief to both consumers and businesses.
Factors Affecting the Petrol Price
There are a number of factors influencing the determination of fuel pricing, making it no simple matter. This urges the government to revise fuel prices from month to month.
Brent Crude Oil:
The global price of the crude oil used for making petrol and diesel plays the biggest role in the petrol price. South Africa, as many other countries without any natural oil resources are at the mercy of the oil barons of the world. The price of crude oil is directly linked to the climate of foreign relations, war in the Middle East, specific seasons and of course supply and demand. For the first time in six years, the price of Brent crude oil dropped below $50 a barrel at $42.51 in August 2015, causing this month’s SA petrol price drop. For the past number of years, the crude oil prices fluctuated and mostly peaked due to the US / Iraq war and tension in the Middle East. The recent oil price decrease is due to the stronger US Dollar, global oversupply of oil and OPEC’s (Organization of Petroleum Exporting Countries) unwillingness to cut production, US nuclear deal with Iran, growing tendency for switching to alternative fuels, China’s currency devaluation and weak economic activity causing low oil demands.
The political climate and health of the South African economy have a direct and profound impact on the value of our currency. The South African Rand took quite a plunge to it’s lowest point in five years, from a value of R7.26 in 2011 against the US Dollar to R13.44 on 2 September 2015. Even though the price of Brent crude oil dropped significantly, the exchange rate buffered the drop in our petrol price to some extent.
Government Fuel Levies:
According to The National Roads Act of 1971, the government of South Africa is allowed to collect a fuel levy. These taxes are a certain percentage of every litre fuel sold and are the easiest way to collect money for the failing e-toll budget systems, for example.
Petrol Price Ripple
A high petrol price has far reaching ripple effects in all areas, negatively affecting citizens from all walks of life. This all surely effects inflation too. Whether you make use of your own vehicle or public transport, you surely end up with less money in your pocket. The famous negative public saying sums it up fairly accurate: When the fuel prices go up, everything else go up too, but when it comes down, nothing else do. What most of us don’t always understand are all the factors responsible for this scenario. Even though the lower petrol price might not hold many other advantages for the moment, we might as well enjoy it as it is. We can at least go out and live a little!