Petrol price likely to dive in time for festive season

Tamlyn Stewart

Tamlyn Stewart

Motorists could receive an early Christmas present from the Department of Minerals and Energy in the form of a significant cut in the price of petrol on December 3.

A rapidly falling oil price could translate into a petrol price cut of as much as R1,65 per litre, according to Econometrix economist Tony Twine.

He said any change in the strength of the Rand or the oil price was unlikely to have much impact on the forecast cut, but the actual price cut at the pumps would depend on the DME.

"The threat to receiving R1,65 is the DME might make a political decision to hive off some of that to the Slate account," said Twine.

A levy called the "Slate" levy is included into the price of petrol and diesel to finance the cumulative under recovery or total amount owned by fuel consumers to the oil industry. This would bring the total cut to 339 cents per litre since the retail petrol price peaked at R10,70 per litre in July in Gauteng.

The average over-recovery for the period October 31 to November 21 was 155,431 cents per litre.

An over-recovery means that 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 petrol price.

An over-recovery therefore implies that the retail petrol price can be lowered at the next monthly price adjustment, provided that government does not introduce a new levy or raise either the wholesale or retail margin.