Fuel prices: cuts in sight after a month of over-recovery

2012-06-20 00:00

JOHANNESBURG — The price of petrol may go down by 73c per litre in July and diesel by 52c if the price of crude remains the same.

This will see the price for fuel at the coast go back to R10,59 per litre and that of 93-octane in Gauteng to R10,77, compared to the current record levels of R11,97 and R12,05 respectively.

The previous record wholesale price was in July 2008, when it stood at R11,43 in Gauteng and R11,29 at the coast. A drop of 52c on the first Wednesday of July will take diesel to R9,96 at the coast and R10,21 in Gauteng.

If the rand continues to strenghten against the dollar and if the international price for crude oil continues to weaken, fuel prices could drop to lower than what they were last year.

This eventuality would create room for the Reserve Bank to drop the interest rate on the back of inflation, which has fallen below the target of six percent.

The over-recovery on petrol was 77,7c per litre on Junie 18 and on diesel 55,8c.

An over-recovery happens when the projected price of fuel, based on the daily averages of crude oil prices and and currency exhange rates, is lower than the retail price of fuel. An sustained over-recovery period implies that the retail price of fuel can be lowered at the next monthly price setting, which happens on the first Wednesday of a month.

The next fuel price announcement is expected on June 29.

The average over-recovery from June 1 to June 18 was 69,3c for petrol and 49,2c for diesel.

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