Motorists are finally expected to receive a sizeable petrol price reduction this July, following four months of consecutive hikes.
New data from the Central Energy Fund (CEF) for the second week of June indicates that both petrol and diesel will experience an over-recovery next month.
Importantly, the over-recoveries should be large enough to overcome the reintroduction of South Africa’s fuel taxes.
Petrol is currently set for an over-recovery of between R2.52 per litre and R2.54 per litre, while diesel will see a greater over-recovery of between R4.28 and R4.57 per litre.
These are the CEF’s fuel price adjustment predictions for the end of the second week of June:
- Petrol 93 – decrease of R2.54 per litre
- Petrol 95 – decrease of R2.52 per litre
- Diesel 0.05% (wholesale) – decrease of R4.28 per litre
- Diesel 0.005% (wholesale) – decrease of R4.57 per litre
The unfortunate news is that the over-recoveries have declined from last week, suggesting that the total savings will be even lower by the month’s end.
The CEF’s data also does not account for any adjustments to the Slate Levy, which may affect the final fuel price.
The reductions are predicated on the fact that global oil prices have declined over the last month, and that the rand has held its value against the US dollar.
As of mid-June, the rand is trading at around R16.25 to the dollar, a value which it has more or less held for the past few weeks.
The rand’s resilience is largely thanks to positive local sentiment and a stronger commodity market, as well as the fact that the US and Iran appear to be close to signing a deal.
On a similar note, the stabilising situation in the Middle East has helped bring down oil prices, which have dropped to a low of $86 per barrel.
The improved oil price came after Iran’s semi-official Mehr News Agency published a 14-point draft deal it said was under discussion with the US.
The draft includes a possible reopening of the Strait of Hormuz within 30 days under Iranian arrangements and the lifting of oil sanctions.
US President Donald Trump, meanwhile, said a peace deal with Iran could be signed as soon as the weekend, calling off previously announced strikes on the country.
Bear in mind that similar statements were later undermined by a failure to reach an agreement, leading to new attacks.
Don’t forget fuel taxes
While the basic fuel price of petrol and diesel is on a downward trajectory, the savings will be lower than reported due to the reintroduction of the full General Fuel Levy (GFL).
The GFL was reduced by R3 per litre in April to cushion consumers from the enormous fuel price hikes in the wake of the Iran war.
It was later extended to May. However, the National Treasury added half of the GFL back to the fuel price in June.
Consequently, while petrol was supposed to see a price cut, the reintroduction of a R1.50 tax ensured that the cost of the fuel actually went up this month.
The same process will repeat this July, as the treasury will add another R1.50 to the cost of petrol, while diesel is being hit with a R1.96 tax hike.
Even so, the over-recoveries are strong enough that motorists will still see an improvement at the pumps next month, even if it’s not by as much as the CEF’s reports suggest.
The following table shows how fuel prices will be affected in July once the General Fuel Levy is factored in:
| June predictions | Recoveries at end of 2nd week of June | Fuel tax added back in July | Final projected change |
|---|---|---|---|
| Petrol 93 | – R2.54 | + R1.50 | – R1.04 |
| Petrol 95 | – R2.52 | + R1.50 | – R1.02 |
| Diesel 0.05% | – R4.28 | + R1.96 | – R2.32 |
| Diesel 0.005% | – R4.57 | + R1.96 | – R2.61 |
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