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Experts explain why fuel prices could drop

Cape Town - Fuel prices could bring welcome news for motorists in February, independent economist Fanie Brink said on Monday.

This is due to the exchange rate continuing to trade at substantially stronger levels since the end of December and despite the sharp rise in the Brent crude oil price - the international benchmark for oil prices.
 
Analysing the latest information by the Department of Energy, Brink predicts that the prices of petrol 93 (ULP & LRP) in Gauteng could possibly decrease by 36.9 cents per litre on Wednesday, February 7. The price of diesel with a 0.005% sulphur content could possibly go down by 22.5c per litre.

"The agreement between the members of the Organisation for Petroleum Exporting Countries (Opec) and Russia (which is not a member of the organisation) to further reduce their production until the end of 2018, as well as a higher international demand, has increased the oil price from $63 a barrel to almost $70 a barrel during the past month," said Brink.

"Due to this rise in the crude oil price, the average international petrol price may increase by 6.2c per litre in February and the price of diesel by 23.3 cents per litre."

The average daily exchange rate has strengthened from R/$13.46 to R/$12.36 over the past month and can result in a decline of 43.1c per litre in the price of petrol and 45.8c per litre in the price of diesel.

The final price changes will be announced by the minister of energy by the end of January. 

The Automobile Association (AA) also forecasts that fuel prices are set for decreases at the beginning of February.

"The rand/dollar exchange rate has had one of its flattest periods of trading in recent times," said the AA.

"The rand has traded in a very narrow band between R12.30 and R12.40 to the US currency since the last week of December, bringing some welcome stability."

The AA also noted that the international prices of petrol and diesel were stable over the same period, although there was a slight climb in both in the second week of January.

"The current data predicts a decrease in petrol of nearly 41c a litre, with diesel down by 23c and illuminating paraffin dropping 26 cents," the AA said.

"Continued stability in fuel prices for 2018 will largely depend on political and economic factors which affect South Africa's attractiveness as an investment destination," the AA concluded.

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