Fuel price drop offers short-term relief

TOMORROW'S fuel price drop offers a welcome but short- term relief to consumers.

The price of 93-octane unleaded petrol will drop to its lowest level since August 2012, providing much needed relief to consumers facing a lean January after Christmas celebrations expenditure.

The main reason for the cheaper fuel is continuing weak global crude oil prices. A depreciation in the rand/dollar exchange rate actually led to an increase in the basic fuel price of up to 19.75c/l, but this was offset by the fall in crude prices.

Econometrix chief economist Azar Jammine said the fuel price cut was favourable for consumers in the short term. But he warned that a dramatic rebound in the longer term could not be ruled out if the Organisation of the Petroleum Exporting Countries agreed to cut back output.

The cumulative effect of petrol price cuts over recent months was a 1% gain in disposable incomes. The effect would vary according to how much individuals spent on transport. "There would be an even bigger impact in the short term if retailers and other businesses that consume a lot of fuel were to pass on the benefits to consumers, but I would not hold my breath," Jammine said.

"In the past two years, those businesses have been negatively affected by the drop in the value of the rand on imported goods and have not passed that cost on to their customers. So they are likely to use the windfall provided by lower fuel prices to replenish profit margins."

With inflation likely to fall below 5%, there would be no pressure on the Reserve Bank to increase interest rates.

The retail price of 93-octane petrol will drop by R1.27/l and R1.23/l for 95-octane petrol. The retail price of sulphur diesel will drop by R1.04/l.

The retail price of illuminating paraffin will drop by R1.44/l and liquefied petroleum gas by R2.10/ kg. - BDlive