Record fuel price drop on April 2020

The Department of Energy has published the latest fuel price adjustments for April 2020, showing a record drop of almost R2 for petrol and R1.40 for diesel.

There are changes per litre:

• Petrol 95: a decrease of R1.88 (inland) and R1.94 (coastal)
• Petrol 93: a decrease of R1.76 (inland) and R1.82 (coastal)
• Diesel 0.05%: a decrease of R R1.34 (inland) and R1.40 (coastal)
• Diesel 0.005%: a decrease of R1.35 (inland) and R1.41 (coastal)
• Illuminating paraffin: a decrease of R1.84 (inland) and R1.98 (coastal)

The massive cuts come as the world is knocked down by the global coronavirus pandemic, which has sent markets into a tailspin, while a price war between Russia and Saudi Arabia saw oil prices crumble.

Brent crude prices have dipped below $25 per barrel.

The petrol price drop will greatly assist essential services operating during an extraordinary time in the country, as well as power utility Eskom, which relies on diesel-powered electricity generation at times of low supply.

Local fuel prices are predominantly affected by both these factors – specifically the impact on the rand/dollar exchange rate, and the resultant price of international petroleum products.

The average international product prices of petrol, diesel and illuminating paraffin decreased during the period under review, and the rand depreciated against the US dollar on average, when compared to the previous period.

The average rand/US Dollar exchange rate for the period 28 February 2020 to 26 March 2020 was R16.43 compared to R14.98 during the previous period. This led to a higher contribution to the basic fuel prices on petrol, diesel and illuminating paraffin by 40.00 c/l, 46.62 c/l and 42.26 c/l respectively.

Also coming into effect in April are increased taxes.

The minister of finance, in his Budget Speech on 26 February 2020, announced that the fuel and the Road Accident Fund levies on both petrol and diesel will increase by 16.0 c/l and 9.0 c/l respectively on 01 April 2020.

With effect from 01 April 2020, the fuel levy in the price structure of petrol and diesel will, therefore, amount to 377.0 c/l and 363.0 c/l respectively. The Road Accident Fund Levy in the price structure of both petrol and diesel will amount to 207.0 c/l with effect from 01 April 2020.

Fuel was not in high demand due to COVID-19 travel restrictions, but those who need to fill up with petrol would see a whopping R1,94 cents drop at the pump.

“There is little indication of what the final picture of COVID-19 spread will be, nor where the Rand will stabilise against the dollar. It can also not be predicted how long the Saudis are prepared to hold out in their oil price war, since their oil industry is believed to be able to maintain profitability at substantially lower per-barrel prices than the current level,” the AA notes.

It’s one of the biggest price cuts in recent years and by no means an April fool’s joke.

In addition to these above factors, there was also an increase in transport tariffs over the period, which factors into the inland costs of fuel.

The increases in primary transport cost are attributed to an average annual increase of 7.6% in road transport tariffs and an annual increase of 11.6% in pipeline transport costs announced by the National Energy Regulator of South Africa (NERSA) on the 26 February 2020.

Increases in primary transport cost will differ in the 54 fuel pricing zones due to the different transport cost increases applied in the 54 pricing zones. For example, the transport costs for petrol and diesel will increase by 6.3 CPL in Gauteng and 0.2 CPL in coastal areas.

With these increases in mind, the table below shows how these changes will reflect at the pumps in Gauteng: