Petrol price may drop by R1 a litre

A “big drop” in the petrol price is expected in September, T-Sec economist Mike Schussler said on Wednesday.

“I see petrol dropping around R1 per litre—or even more,” Schussler said.

He also expects diesel to drop by R1,60 a litre and paraffin by R1,45 a litre, “or even more if things remain the same”.

One or two cents might be taken off for past under-recoveries, he said.

However, even if the decrease in the petrol price is as large as expected in September, petrol will still be up 38% compared with a year ago, he added.

He expects petrol to drop month-on-month by 9,6%—the largest month-on-month drop in the past 10-and-a-half years. Diesel should see a month-on-month drop of 14,1%—the biggest month-on-month decrease in two decades.

A drop in the diesel price will be important for South Africa’s economy, Schussler said.

“We have a lot of land transport here, while the big cities in Europe have waterways.”

However, the economy will still feel the high cost of diesel for a few months.

“If the drop in diesel prices is the beginning of a trend, then this would become important for inflation—it would delay second-round inflation fears where prices are passed on,” he said.

Transport companies have been “taking strain”, as well as farmers. Furthermore, fertiliser prices move with oil prices. Lower prices will also help spending on infrastructure such as roads as tar comes from oil, he said.

As far as the oil price is concerned, Schussler said there is still a concern that oil prices will rebound in the fourth quarter.

“Winter is coming in the northern hemisphere, the winter buying season has begun and the hurricane season only ends in November,” he said.

The world still has tight supply-demand ratios and politics in the Middle East could affect oil prices.

Oil is one of the most difficult commodities to price this year, he added. “Depending on the demand-supply situation, I see oil at between $80 and $125 at the end of this year,” Schussler said.—Sapa