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Fuel prices set to go down

May 20 2011 06:42 Francois Williams

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Cape Town - A significant decline in the diesel price and a possible petrol price reduction are expected in June, based on the latest figures from the department of energy.

There was an average diesel over-recovery of 35c/litre between April 28 and May 17. On May 17 the over-recovery was 53c/litre, which means the diesel price could come down even more than 35c/litre by June 1 if the exchange rate and oil prices remain at current levels until next week.

On petrol there was an average under-recovery of 6.8c/litre from April 28, but May 17 saw a 30c over-recovery. This is a strong indication that by May 26, the end of the period under review – on the basis of which next month’s price adjustments will be calculated – the average under-recovery could flip into an over-recovery.

A lowering of the diesel price in particular could help lift current inflationary pressure after the fuel price’s dramatic rise of more than 21% since the beginning of the year.

In an unprecedented move, the International Energy Agency (IEA) encouraged oil-producing countries to increase production to keep prices in check.

After its board’s quarterly meeting this week, the agency cautioned that there were growing signs that since September 2010 rising oil prices had constrained global economic recovery. It attributed this to declining household and business income, upward pressure on inflation and interest rates, and growing trade imbalances.

Despite the almost 10% drop in oil prices since the start of May, oil prices are still heady because of market factors, geopolitical uncertainty and expectations of future demand.

International demand for oil usually rises between May and August, when there is an urgent need to deliver additional stocks at more competitive prices to refineries.

The IEA said further price increases could derail economic recovery and were not in the interests of either the oil-producing or consumer countries. Developing countries that imported oil were seriously affected by high oil prices, said the IEA.

Brent crude started the year at about $94/barrel and by April had reached a high of $126 before falling to the current $112.

Market analysts are speculating on the reasons for the recent drop. In its May oil market report the Organisation of Petroleum Exporting Countries blamed profit-taking by oil dealers for the sudden decline, reports the Middle Eastern news service Arabian Oil and Gas.

Other analysts attribute it to the sharp drop in silver prices, precipitating a sell-off in electronic trades of oil futures.

- Sake24

For business news in Afrikaans, go to Sake24.com.
fuel  |  petrol  |  diesel
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