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Petrol Price – Ups and Downs

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The Ups and downs of the petrol price

The Department of Energy has announced that the petrol price will fall on the 2 September. We can now expect the price of petrol (both 93 and 95) to decrease by 69c/litre, diesel (0.05 percent sulphur) will decrease by 54c/litre, and diesel (0.005 percent sulphur) will decrease by 51c/litre. It makes for two months in a row that the prices have dipped, last month we noticed a 51c/litre reduction in the petrol price.

The movement of the petrol price has been a puzzle for most.  It appears to be on the increase constantly, however there are slices of time when we are teased with a small price drop only to be burdened with an even larger increase in the next month.

What are the components of the petrol price?
The basic fuel price is the conversion of the US Dollar quoted oil price to Rands. The product of the Rand/Dollar rate and the price of Oil should be the main driving force of the price. We have noticed the price of Oil slide into lower territory from highs of $140 per barrel to the more humbled Forty-something dollars per barrel. During  a similar period the rand has tumbled. We were paying about R6 for a dollar currently the price tallies over R13 for just one dollar. In theory it would seem that price of petrol in Rands has returned to the levels that we experienced during the the high crude oil prices and high petrol prices of the 2008 period .This is merely one aspect of the fuel price, the various government duties and levies make up the rest of the price at the pump. The Finance minister during the budget speech often makes adjustments to the levies and duties, thus even though the theoretical rand value of Oil is at its highest levels we will end up paying more at the pump in time to come.

The price of petrol is not an immediate adjustment and the the Energy ministry makes an allowance to help buffer the shocks in price. The change in the buffer is called the fuel price under or over recovery.

The recent moves in the Rand means that over the next few months we can brace ourselves for a a few sinister petrol price spikes. Fortunately this double dose of a petrol price dips arrives in the midst of an economic storm, we will battle with a sliding currency, interest rate rises, inflation, lower commodity prices a heavy job loses in the mining sector.


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*Source Shell – petrol prices (http://www.shell.com/zaf/products-services/on-the-road/fuels/petrolprice.html)

What makes the Oil price change
The Supply and demand are the main drivers of the Energy price. The recent slow-down in China has meant that the demand for all commodities are lower, it also means that industry will be less bouyant. These are important demand drivers for oil. On the supply end the world  pumps Oil at a slower pace to match the smaller demand yet the producers are still in the over-supply position. It is expected that global oil demand in 2015 should be 1.4 million barrels per day, with 2016 slowing down to 1.2  million barrels per day. During times of high Oil demand there are often many suggestions for alternatives, including fracking, bio-fuel and Solar solutions.

The Effects of Higher Petrol Prices
Naturally higher fuel prices means that we pay more to transport ourselves. It is interesting to note that mini-bus taxi fares are a cost that rises with fuel increases and does not dip with the decreases, the impact of this is inflationary. Inflation just means the price changes of a basket of goods and services, in general a rise in the fuel price means that the everything that we transport in our economy goes up if the price of fuel rises. Inflation is important because the Reserve Bank uses this as a signal  to increase interest rates.

Fuel saving tips
1. Always Fill your tank in the morning.
2. Stop aggressive driving and don’t over rev your car.
3. Only fill up when it’s half tank rather than quarter tank.
4. Say no to giving free lifts to friends.
5. Change to highest gear rather than driving in lowest gear.
6. Service your car regularly.
7. Look for more ways not to travel alone. Carpooling will help a lot, even only one day a week.
8. Don’t be hard on brakes and Don’t be hard on your accelerator.
9. Try not to use the air-conditioner.
10. Check your tyre pressure if it’s correct.
11. Keep windows closed.
12. Go for lift clubs to travel to work. Four is an ideal number: one member uses his or her car for a week, and the other for another week like that among the four of you.
13. Travel at a regular speed (ie don’t repeatedly accelerate and then slow down); use cruise control if you have one.
14. It is more economical to use the air-conditioner than driving with open windows.
15. Accelerate downhill and maintain speed on inclines; roll to a stop sign.
16. Get to know the timing of your local traffic lights.

*Source Fin24

Written by Advocate Lavan Gopaul, Head of MANCOSA Business Nexus Unit

 

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and opinions of MANCOSA.

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