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Promising news for petrol and diesel prices expected next week

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Despite the South African rand hitting its lowest point ever against the US dollar, motorists in the country can expect some relief as petrol and diesel prices will likely drop in June. BusinessTech reports that this drop is because the latest data from the Central Energy Fund indicates that fuel prices continue to be over-recovered due to lower global oil prices. Therefore, there are no sudden and significant shifts in the coming days. In that case, petrol prices will likely decrease by approximately 80 cents per litre next week. Likewise, diesel will probably drop by around 90 cents per litre.

The primary driver behind this price relief is the decrease in oil prices, which has contributed to a reduction in international product prices and an over-recovery ranging from R1.27 to R1.37 per litre. However, the recent weakness of the rand has significantly eroded these benefits, cutting around 43 cents per litre from the overall relief.

It’s important to note that the Department of Energy’s daily snapshots are not predictive and do not account for potential adjustments such as slate levy modifications or retail margin changes. The department determines these adjustments, which consider various factors, at the end of each month.

The exchange rate between the rand and the US dollar and international oil prices primarily influence the fuel cost in South Africa. Therefore, the fuel price is adjusted on the first Wednesday of every month based on these two factors. The upcoming price changes will go into effect from Wednesday, 7 June.


Also read: Get Ready for Petrol Price Hikes and Diesel Drops: Here’s What to Expect in April

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Regarding oil prices, Bloomberg analysis reveals that they increased last week following a tentative agreement between US President Joe Biden and Republican House Speaker Kevin McCarthy on the US debt ceiling, which helped avoid a potential default. In contrast, while oil futures closed 1.2% higher on Friday and continued to rise on Monday, oil prices remain around 9% lower for the year due to China’s sluggish economic recovery and the Federal Reserve’s aggressive monetary tightening, impacting demand forecasts.

Despite the positive trend in oil prices, the rand has experienced the opposite. The currency has faced persistent pressure throughout May, initially due to concerns over a potential grid collapse and further exacerbated by allegations from the US embassy regarding arms supply to Russia. Additionally, international banks raised concerns about a possible recession in the South African economy, and the Reserve Bank’s decision to raise rates by 50 basis points negatively impacted investor sentiment.

While some of these issues have been addressed, with Eskom stating that a grid collapse is improbable and an independent investigation initiated into the arms supply allegations, the rand remains weakened and carries a high-risk premium. Without significant policy changes or positive economic indicators, the rand will likely remain under pressure, leaving South Africa vulnerable to further challenges.

The Department of Energy will officially announce the petrol price changes before they take effect next week.

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Diesel prices set to drop, while petrol holds steady

Picture: Facebook / Business for Sale – South Africa

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