Robert Laing

Robert Laing

Good news for families heading off on their summer holidays is that the petrol price is dropping R1,61 tomorrow at midnight.

Inland 93 octane will cost R7,18 per litre, making it 15 cents cheaper than the R7,33 it cost in December last year. Coastal 95 octane drops to R7,11 per litre.

Cheaper petrol than a year ago offers a lifeline to battling service stations who saw sales dive to barely eight billion litres of petrol in the first three quarters of this year versus nearly 8,6 billion during the same period last year.

Fuel Retailers' Association chief executive Peter Morgan said: "We need a very good holiday season to make up some ground."

Service stations depend on sales volumes and not price because government's price regulation system fixes their cut at 67,3 cents per litre irrespective of the current petrol price.

The inland migration to the coast over December makes the Christmas holidays the best month for service stations.

"The price decrease is wonderful and we hope that translates into more sales. But it's a double edged sword for us," Morgan said.

Government's petrol price setting regime means that when a big price cut is announced on Friday, motorists coast on empty until the new price takes effect on the first Wednesday of the month. "We get left with large stocks in the underground tanks over the weekend and Monday and Tuesday, and then we get a rush of sales which leaves very little in the tanks."

This makes cash flow tough for service station owners because the oil majors demand payment up front, passing the problem of recouping petrol bought at the previous month's higher prices at the regulated lower prices to the retailers.

Standard diesel is dropping 81 cents per litre, taking the inland wholesale price to R8,22 per litre.