Fuel price on track to be cut

Cape Town - South Africa is hardly a week into the review period for the next fuel-price adjustment and there is already an average over-recovery of 10c/litre on petrol and 5.8c/litre on diesel.

Friday's over-recovery was a good 43c/litre on petrol and 42c/litre on diesel. If this is sustained over the rest of the review period leading up to October 1, a sizeable fuel-price reduction can be expected on October 7.

According to SA Fuel Retailers Association director Peter Noke, the expected price reduction will be a bonus for motorists and the economy, but bad news for stock management at filling stations.

In the days before fuel prices fall sharply motorists become reluctant to fill up, and filling station owners are in a quandary because they want to sell as little as possible of the stock purchased at a high price for the new, lower price.

Because they want to be "caught" with as little high-priced stock as possible, they try to postpone ordering until after the price comes down, but they then face the danger of being without fuel if the wholesalers cannot deliver in time.

Fuel wholesalers, on the other hand, want to sell filling stations as much as possible at the higher prices.

The latest available figures from the Department of Energy cover the period from August 28 to September 4, when the rand strengthened from R7.76 to R7.59/dollar, and the price of crude oil fell from about $72 to $68.

The oil markets are looking ahead to Wednesday's meeting of the Organisation of Petroleum Exporting Countries (Opec) in Vienna, Austria, for further signals. Bloomberg reports that analysts expect Opec to maintain its production quotas at current levels. Opec produces 40%-odd of the world's oil.

- Sake24.com

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