Gwede Mantashe, the minister of mineral resources and energy, announced on Monday that diesel and illuminating paraffin prices would reduce starting on Wednesday.
The price of gasoline in South Africa will drop by the most in two years, raising the possibility that inflation is about to peak. That is a reduction in 95-octane gasoline of 8% from August, which is the largest monthly percentage decline since the beginning of 2020 when demand for crude fell precipitously as a result of global lockdowns intended to stop the spread of Covid-19 and crude prices hit record lows.
The retail price of 95-grade gasoline would drop by R2.04 to R25.42 per litre in Gauteng and to R24.77 in coastal areas, based on a statement from the energy department. Diesel’s wholesale cost would decrease by as much as 56 cents. At wholesale, lighting paraffin will now cost 82 cents less.
During the time period under consideration, the average price of Brent crude oil dropped from US$105 to US$94 per barrel, said the department, which contributed to the reduced gasoline prices this month. Additionally, the rand’s value vs the US dollar had increased marginally, from R16.87 to R16.70.
Monthly adjustments are made to South Africa’s fuel prices based on both global and regional variables. Global considerations include the nation’s importation of both crude oil and completed goods at a price established on the international scale, including importation costs like shipping.
“The demand for petrol is less than what it usually is during the driving season. Motorists are driving less due to inflationary pressures, higher interest rates, and persistent lockdowns in China. This has led to a decrease in the price of petrol during this period,” the energy department said.
John Loos, a property sector strategist at First National Bank, said the decrease in gas prices will relieve commuters’ financial strains brought on by the weak economy.
“Staff working in offices have been feeling the financial pain of commuting in recent months and this may have led to a greater number working more of the time from home than may have been the case in a scenario where petrol prices had remained low all along,” Loos said.“Granted, petrol is still expensive, and as such still keeps transport costs high, but every price cut helps.”
The decline might relieve the strain on household finances and inflation, which in July rose to a 13-year high of 7.8%. That may have been the cycle’s high, according to analysts, including Investec Bank Chief Economist Annabel Bishop, who noted that prices for gasoline and diesel also declined last month. A weaker rand and the revelation on Monday that OPEC+ had agreed to a minimal oil production cut for October may prevent significant reductions in petrol prices in South Africa in the months to come. In South Africa, the weight of fuel in the consumer price basket is about 5%.