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Another significant fuel price drop expected for May

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Another significant fuel price cut is on the cards. Here’s what you’re likely to pay from early May.

Johannesburg – Presuming there are no lockdown extensions, South Africans could have at least some of their freedom back by the beginning of May, and as a further consolation in these incredibly difficult times, another significant fuel price cut is on the cards too. 

According to the Automobile Association, mid-month data is pointing to a petrol price decrease of R1.89 a litre, while diesel is looking set to drop by around R1.17 and illuminating paraffin by R1.88.

While that prediction is likely to prove accurate in the case of diesel, if current trends persist, the petrol price cut could be slightly smaller. That’s because the most recent daily reports have shown petrol over-recoveries of around R1.50 a litre, which means the month-so-far average of R1.88 is shrinking each day. The most likely scenario then, is a petrol price decrease that falls somewhere between R1.50 and R1.88 a litre. Which is still a huge saving in anyone’s book.

Even if we work on a conservative estimation of R1.50, the price of a litre of 93 Unleaded petrol will drop to around R12.26 a litre in May, with 95 ULP costing R12.46, while those at the coast will pay R11.76. 

The AA said that although the factors that initially caused the oil price to plunge earlier this year have been largely resolved, such as the standoff between Russia and Saudia Arabia on production cuts, the Covid-19 pandemic is likely to keep the oil market weak for the foreseeable future. 

“World commerce has all but collapsed in the wake of the Covid-19 pandemic,” the association commented.

“Even assuming a fairly rapid end to the pandemic, it will take many months for the global economy to work up a new head of steam, and possibly years before it returns to pre-Covid-19 levels. Absent further shocks, we expect it to be a long while before substantial oil price hikes are a reality”.

The low oil prices have also far outweighed the losses incurred by the South African rand, which has plunged from R15.65 to around R18.45 at the time of writing. 

If the oil market were to unexpectedly recover later in the year and the rand failed to follow suit, motorists could be in for some fuel price shocks.