Petrol price to drop again

After a record-breaking price drop on 7 January, petrol price could drop by R1.04 per litre in February, making the price the lowest it has been in years.

If the price drops drops, it will make it R4 a litre less since August last year.

The latest update from the Central Energy Fund (13 January), shows that there is a current over-recovery of 112 cents per litre on 93 octane petrol and 110 cents for 95 octane.

Diesel shows an over-recovery of 109 cents.

The price of 93 and 95 octane petrol decreased by R1.27 and R1.23 a litre in January, to R11.02 a litre and R11.24 a litre respectively.

“There are various factors to consider when looking at the drop, one of which is the decrease in the oil price in the global market,” said Peter Baur senior lecturer at the Department of Economics and Econometrics at the University of Johannesburg.

“The demand is not as high as it used to be since the 2008 financial crisis,” said Baur.

According to Baur, the decrease in demand is also influenced by businesses using alternative energy instead of petrol.

“The cost of production is lower but the problem we may face is that consumers may not benefit from this. The petrol price has been going down but taxi prices have not, and numerous commodities are still on the same price they were on before the drop. Businesses may take advantage of the drop,” he said.

He said demand is low because of weak economic activity, increased efficiency, and a growing switch away from oil to other fuels.

The turmoil in Iraq and Libya – two big oil producers with nearly 4m barrels a day combined – has not affected their output. The market is more sanguine about geopolitical risk.

In addition, he said America’s production of oil has grown so much that it is not dependent on oil importers any more.

Though it does not export crude oil, it now imports much less, creating a lot of spare supply.