South African motorists could possibly get relief at the pumps from the record-high fuel prices in August as the global oil price dipped below the $100-mark per barrel today.
The price of Brent crude oil plunged more than 7 percent on Tuesday to $99.95 per barrel after starting the day at $105 per barrel.
Oil prices were rattled by fears of declining demand amid the resurgence of Covid-19 outbreak in major cities in China.
China, the world’s second largest economy and the biggest importer of oil, is experiencing a fresh spike of the virus and the discovery of a new sub-variant has driven fears of renewed lockdown restrictions.
This, and worries of a global economic slowdown, has seen oil prices trading lower as restrictions in China could temper fuel demand.
The Brent crude oil price has risen by at least 40 percent since the Russian war on Ukraine, contributing substantially to the rate of inflation in South Africa.
Transport costs are the largest contributor to inflation in South Africa, with food and non-alcoholic beverages coming in second place.
South Africa’s largest import on a rand value basis is oil and petroleum products and this is priced in US dollars, and thus has a significant impact on inflation.
The under or over recovery in the fuel price in one month mainly determines the change in the fuel price in the following month.
Last month, fuel prices increased to record highs in South Africa, with the price of 95 octane going up by R2.57 to R26.74 per litre while the price of 93 octane increased by R2.37 to R26.31 per litre.
A major factor in the increase of the international petroleum prices has remained the ongoing conflict in the Ukraine which is contributing to supply and demand pressures.
However, analysts said there was a 35 cents per litre cut currently anticipated in the fuel price for August although it was still early in the month to come to a definitive figure.
However, Investec chief economist Annabel Bishop said the recent drop in the oil price from an inter-month high of $123 per barrel in June had exceeded the rand depreciation’s effect on fuel prices in July.
Bishop said the subsidence in the cost of petroleum products was currently indicating the potential for a cut in petrol, diesel and illuminating paraffin prices.
“The latest figures show around a 60c/litre cut in diesel prices, and just above 70c/litre for illuminating paraffin, although this can change as the month of July progresses,” Bishop said..
“Oil and petroleum products prices have been negatively impacted by worries over global growth.”
Meanwhile, Sasol was not rattled by the declining oil price as the share price eased 0.7 percent to R365 per share by close of JSE.
BUSINESS REPORT