Early Xmas gift for motorists

Johannesburg - South African petrol pump prices will fall by 18 percent next week on a sharp drop in international oil prices, another sign that inflation is easing.

A statement from the minerals and energy department on Friday said 95 octane petrol - the most used fuel - would drop to R7.35 rand a litre on December 3 in Gauteng from R8.96. It is now R7.11 at the coast from R8.72 before.

Wholesale diesel prices will drop by up to 81c a litre, or about 9%, from the same date, despite a weaker rand currency.

South Africa adjusts its fuel prices every month, taking into account changes in the value of the rand currency, oil prices and government levies.

"During the period under review, the average international product prices of petrol, diesel and illuminating paraffin decreased," the department said.

The latest adjustment marks the fifth monthly fall in a row and brings to more than 30% the decrease since the petrol price hit a peak R10.70 in July, adding to hopes inflation will slow sharply.

With food prices, higher fuel costs had been the main drivers pushing, and keeping, consumer inflation outside the central bank's 3% to 6% target band.

But after hitting a record high of 13.6% year-on-year in August, CPIX inflation eased to 12.4% in October, raising speculation that the Reserve Bank may start unwinding the total 5 percentage points in rate increases since June 2006.

Most analysts foresee a rate cut early next year but the market is pricing in a move on December 11.

The minerals and energy department said a big drop in crude oil prices in November compared to October far exceeded the depreciation of the rand, which slipped on average by nearly 6%.

- Reuters