By Lehlohonolo Lehana.
The Bureau for Economic Research (BER) says households could be in for some respite in the coming months as petrol and food prices are set to cool off.
The economists at the BER noted a downward trend in global oil prices, which – if the trend persists – will lead to a sizeable fuel price cut at the end of the month.
“The one-month ahead Brent crude oil price declined by 13.7%. Recession fears have weighed on the oil price since July. Indeed, brent averaged about $105 a barrel in July, down from around $118 a barrel in June, while the average during the first week of August was just $97 a barrel,” the BER said.
“Although still early in the month, this could be good news for South African consumers who already saw a R1.32 a litre decrease in the petrol price last week.”
The latest daily fuel price snapshot from the Central Energy Fund reflects this downward trend in oil prices, showing a R2.00 to R2.50 contribution to an over-recovery in prices.
When coupled with the rand’s stronger performance in August so far – relative to its much weaker performance in July – motorists could see a petrol price cut of R2.80 in September if current market conditions persist.
On Wednesday (3 August), the domestic petrol price came down by R1.32 per litre, with diesel prices dropping slightly less by between 88 and 91 cents per litre.
The Automobile Association (AA) pointed to the potential for another price drop in September if the international oil price – one of the key drivers of high petrol prices – continues to decline.
Brent crude traded at around $95 per barrel, well off its July average.
Annabel Bishop, chief economist at Investec reiterated the AA’s view, stating that another petrol price cut of around R3.00 per litre is building for September.
She added that inflationary price pressures that affect fuel, food and energy will likely slow in the later parts of this year.
According to the BER, the easing of oil prices will also have another knock-on effect, suggesting that the country may have seen the peak of the inflationary cycle for both fuel and food.