May's petrol price to hit its lowest level in years - as oil collapses
- The latest data from the Central Energy fund shows that the petrol price is set to decline by close to R2 in May.
- This would make the petrol price the cheapest in four years, despite increases in fuel taxes.
- The expected decline in fuel price is attributed to Brent crude oil trading at its lowest levels in 20 years.
- For more stories, go to Business Insider's home page.
The petrol price is set to decline by close to R2 in May to its lowest levels in four years due to an unprecedented decline in global oil prices.
Brent crude oil has been trading below $16.50 a barrel on Wednesday morning, its lowest price in 20 years, predominantly due to a global slowdown in demand due to Covid-19. Transport has come to a standstill in many places as more than a third of the world's population is currently in lockdown to curb the spread of the coronavirus.
Meanwhile, the world is running out of storage space to keep all the oil that is being pumped out. In the US, this has resulted in traders paying buyers to take oil off their hands - which meant that some oil prices fell below zero.
The latest data from the Central energy fund (CEF) shows that the price of a litre 95 unleaded petrol could decline by R1.75, 93 unleaded petrol by R1.69, and Diesel by R1.27 in the first week of May.
This is, however, dependent on whether low Brent crude oil prices, and the rand’s exchange rate remain at current levels.
This would be the second largest local fuel price decline after a litre 95 unleaded petrol declined by R1.88 in April, and 93 unleaded petrol by R1.76.
The price of 95 unleaded petrol inland in May is therefore set to be around R12.21 a litre - lower than what it was in May 2013.
The price decline would make the fuel price the lowest it has been since October 2016, despite increases in fuel levies.
Also read: You’ll soon pay 25c more tax per litre of fuel – here’s how fuel tax has increased from 2008
The South African fuel prices are calculated once a month by the department of energy, based on data supplied CEF on daily movements in the exchange rate and the oil price.
The anticipated South African petrol price could’ve been larger if the rand didn’t see as large a depreciation against the United States (US) dollar, Simon Brown, founder of the online financial and investment education platform Just One Lap, told Business Insider South Africa.
He said as South Africa is predominantly an oil-importing nation, the price of oil, therefore, has a direct impact on the local fuel price.
“The oil price will likely continue to decline as global demand for oil declines, and storage space becomes limited,” Brown said.
He said the effect of the oil price decline on the fuel price will depend on whether the rand continues to depreciate.
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