South Africans can take joy in the fact that petrol prices are at the lowest point they have been in nearly three years.
The Department of Mineral Resources and Energy (DMRE) recently announced the latest fuel price adjustments for October 2024, which slashed costs by more than R1 per litre across the board.
As a result, petrol 93 can now cost as low as R19.94 per litre, dropping to levels not seen since the start of 2022.
Good news for everyone
It’s no secret that petrol has been trading at an all-time high in South Africa over the past few years.
The price of a litre peaked in July 2022 at an astounding R26.09 for petrol 93 (R26.74 for 95), which is R6.15 per litre more than what we are paying now.
To put that in perspective, a car with a large tank capacity of 80 litres would have paid R2,087.20 to top up in July 2022 compared to R1,515.20 today – a savings of R572.
Naturally, this is a huge relief for South Africans who have been struggling to cope with the ongoing cost-of-living crisis.
Dr Azar Jammine, chief economist at Econometrix, recently spoke on SABC News about the petrol price adjustments, saying that the reductions would “undoubtedly create a little breathing space for households.”
He went on to explain that lowering the petrol price would free up household incomes to spend on other goods and services, which would stimulate economic growth and prevent a recession.
Additionally, Jammine said there was “little doubt” that the South African Reserve Bank will now be pressured to further reduce interest rates when its monetary policy committee meets up again this November.
With fuel prices now sitting at a low not seen in almost three years, it is possible that inflation could subside to “no more than three-and-a-half percent in a couple of months’ time,” said Jammine, down from the current rate of 4.5%.
Why the sudden relief
Petrol prices have been on a downward trend for most of 2024, barring hikes in February, March, and May.
Since June, the precious liquid’s value has been on a consistent decline largely owing to two main factors, the US dollar exchange rate, and falling international oil prices.
As of late September, the rand was trading at R17.6723 per dollar, compared to R18.0578 in August.
The rand’s improvement can be attributed to South Africa’s economic performance thanks to a lack of load-shedding, as well as an optimistic outlook following the election of the new Government of National Unity which has seen investor funds piling into the country.
As for oil prices, a barrel of Brent Crude went from $78.80/barrel to $71.60/barrel between August and September, making refined petroleum products significantly cheaper to import.
The result is that the Basic Fuel Price of petrol dropped by 91.71c/litre in October, and similar cost-cutting has been occurring for much of 2024.
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