Significant petrol price drop for July

Motorists can expect a decrease in petrol for July, that is according to the Automobile Association. Courtesy #DStv403

JOHANNESBURG - Motorists can expect a decrease in petrol for July, that is according to the Automobile Association (AA).

Petrol is expected to drop by 86 cents a litre, diesel by 68 cents, and illuminating paraffin by 58 cents.

The decrease is due to lower international oil prices in June.

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The Central Energy Fund, however, said the price drop could have been greater had it not been for the rand.

“June was the weakest month for oil in the last quarter, with crude briefly slipping below $60 to the barrel at mid-month. However, renewed tensions in the Middle East and a downturn in USA oil inventories have put pressure on the commodity, which has ticked up over the past few days,” the AA said.

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The AA added that the “damaging spat over the mandate of the Reserve Bank sent jitters through investment markets. In the wake of the fracas, the rand's daily exchange rate against the US dollar spiked by more than 60 cents.”

The association cautioned that current tensions between the USA and Iran could have an impact on the economy.

“South Africa's economy would be very badly affected if, as earlier in the decade, we were to return to sustained prices in excess of $100 per barrel. In such an environment, any event which affected the rand markedly would have a dire effect on fuel users.”

How are petrol prices calculated?

According to the South African Petroleum Industry Association, the petrol retail price is regulated by the government.

It is changed every month on the first Wednesday of the month.

The calculation of the new price is facilitated by the Central Energy Fund on behalf of the Department of Energy.

The petrol pump price is made up of a number of price elements and these can be divided into international and domestic elements.

There are two factors that influence the price of petrol, namely external and internal.

External factors: The exchange rate - that is the price of the dollar vs the rand.

Internal factors: These include rising prices in crude oil, transport costs, and taxes and levies.