Siseko Njobeni
3 November 2008
Johannesburg — THE price of petrol is set to fall by 45c/l on Wednesday as the weaker rand takes a bigger portion of the benefits of falling international crude oil prices.
The decrease, announced by the minerals and energy department on Friday, is expected to ease inflationary pressures.
According to the department the wholesale price of diesel with 0,05% sulphur would decrease 24c/l and the 0,005% type would fall 21c/l. The wholesale price of illuminating paraffin would go down 39c/l .
In the period between September 26 and last Thursday , petrol over-recovered by more than 46c/l. An over-recovery occurs when the basic petrol price based on the daily product price and exchange rate is less than the basic fuel price used in the calculation of the monthly retail amount of petrol. While the international crude oil price in that period fell, the average rand/dollar exchange rate weakened to R9,59, compared with R8,01 in the previous comparable period.
The reduction is a welcome relief, Investment Solutions economist Chris Hart said on Friday. "Fuel price increases until July had been relentless and huge," Hart said. But with the international crude oil price falling, South Africans have benefited from back-to-back fuel cuts since August.
"With a cut now, inflation should begin to drift downwards. What will be even nicer will be the rand's strengthening. If the rand had not started weakening since September, the cut would have been even bigger," Hart said.
However, the weaker rand wiped 105,04c/l from the petrol price's over-recovery of 151,10c/l attributable to the lower crude oil prices.
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