A new year brings fuel price relief

Consumers are in for a fuel price decrease on 6 January 2016, the Department of Energy announced on 31 December 2015. The only fuel that will increase in price in the New Year is Liquefied petroleum gas (LPG).

The price adjustments for January 2016 are as follows:

• 93 Octane petrol remains unchanged (see table below for prices).
• 95 Octane petrol will decrease by three cents per litre.
• Diesel (0.05% sulphur) will decrease by 76 cents per litre.
• Diesel (0.005% sulphur) will decrease by 78 cents per litre.
• Single maximum national retail price (SMNRP) illuminating paraffin will decrease by 63 cents per litre.
• Wholesale illuminating paraffin will decrease by 84 cents per litre.
• LPG will increase by 45 cents per kilogram.

 
The price adjustments

Forecasted petrol price adjustment for January 2016:

(Source: The AA and the Department of Energy)
 
Forecasted diesel price adjustment for January 2016:

(Source: The AA and the Department of Energy)
 
The reasons for the price adjustment

The Department of Energy explained: “The main reasons for these fuel price adjustments are the weakening of the Rand against the US Dollar despite the drop in the prices of all petroleum products during the period under review. The Minister of Energy, Ms Tina Joemat-Pettersson, has approved the adjustments to some of the pricing elements of the maximum retail price structure of Liquid Petroleum Gas (LPGas). The maximum retail margin of LPGas will increase by 50.0c/kg with effect from 06 January 2016.”

The Automobile Association of South Africa (AA) noted that the ongoing weakness in international petroleum prices has shielded consumers from the effect of the weakening exchange rate.

Fuel prices would have dropped by up to an additional 27 cents a litre in January 2016 had it not been for substantial weakening of the Rand / US dollar exchange rate. "On December 1, the daily exchange rate used to calculate the fuel price was R14.40 to the dollar. By December 29, it had lost nearly a Rand to R15.30," said the AA.

According to the AA, in reviewing the year as a whole, it was revealed that during 2015 the Rand lost about one-third of its value against the US Dollar. “On 29 December 2014, the Rand was trading at R11.60 to the dollar. In the case of 93 unleaded petrol, weakening in the exchange rate contributed 45 cents a litre in price increases during 2015,” stated the AA.

The AA highlighted that the unexpected removal of Nhlanhla Nene as the minister of finance and the effect that it has had on the economy saw a weakening trend in the economy continue throughout December, indicating that loss of confidence in the economy. The AA is concerned that this loss may continue, and if oil prices stabilise or increase during 2016, fuel consumers will be exposed to the changes in the exchange rate.