The price of 93 unleaded petroleum (ULP) and leaded replacement petrol (LRP) will drop by 24 c/ℓ on July 5, while 95 ULP and LRP will come down by 17 c/ℓ, according to a statement issued by Mineral Resources and Energy Minister Gwede Mantashe on July 3. 

The illuminating paraffin price will also decrease by 4 c/ℓ, while the single maximum national retail price for illuminating paraffin will decrease by 5 c/ℓ.  

The maximum liquefied petroleum gas (LPG) retail price will also decrease, by R2.96/kg. 

However, 0.05% sulphur diesel will increase by 18 c/ℓ and 0.005% sulphur diesel by 12 c/ℓ. 

South Africa’s fuel prices are adjusted monthly based on both international and local factors. International factors include the fact that South Africa imports both crude oil and finished products at a price set at the international level, which includes importation costs.  

Crude oil price shifts were one of the key reasons cited by Mantashe for the change in petrol price. The average Brent Crude oil price decreased slightly from $75.90/bl to $75.10/bl during the period under review.  

One of the main contributing factors to this $0.80/bl drop in price is recession fears and an expected global economic slowdown. As a result, the US Federal Reserve left interest rates unchanged earlier this month, while warning of future increases.  

Conversely, the European Central Bank and the Bank of England have increased interest rates owing to the ongoing recession fears. This slower economic growth outlook has contributed to lower crude oil prices.  

Additionally, the decision by Organisation of the Petroleum Exporting Countries (Opec) and non-Opec members to not increase oil production cuts during their last meeting contributed to the drop in price. 

International petroleum product prices typically impact the local pricing structure as well. 

Moreover, the average international product prices of petrol, diesel and illuminating paraffin increased during this period, while the price of LPG decreased. This was owed to petrol prices increasing because of a continued driving season in the northern hemisphere.  

Moreover, middle distillate prices increased at a higher rate than petrol owing to tighter supplies. LPG prices decreased owing to the decline in the prices of propane and butane. 

The movement in product prices has led to higher contributions to the basic fuel price (BFP) of petrol 95 ULP by 2.66 c/ℓ, diesel 500 ppm and 50 ppm by 37.08 c/ℓ and 31.33 c/ℓ respectively, while the contribution to illuminating paraffin was 15.76 c/ℓ. The contribution to BFP of 93 ULP was lower by 4.88 c/ℓ.  

Another factor influencing fuel prices is the rand:dollar exchange rate. The rand appreciated, on average, against the dollar, from R18.99 to R18.64 per $1. This led to lower contributions to the BFP of petrol, diesel and illuminating paraffin by 19.77 c/ℓ, 19.21 c/ℓ and 18.91 c/ℓ respectively.

The stronger rand affected petrol and illuminating paraffin prices positively, resulting in an overall decrease.  

The implementation of the slate levy also impacted on the fuel price. As at the end of May, the cumulative slate amounted to a positive balance for petrol and diesel of R2.7-million. In line with the provisions of the self-adjusting slate levy mechanism, there will be no slate levy applied to the price structures of petrol and diesel for July, Mantashe said.  

Octane differentials between 95 and 93 petrol grades also affected the price. 

In line with the working rules to determine the BFP, the 95 ULP grade is the price-marker grade and the BFP-differential between 95 and 93 octanes is adjusted on the first Wednesday of each quarter. The BFP octane differential changed during the previous quarter. Therefore, the retail prices of 95 and 93 petrol octanes will be different in each fuel-pricing zone with effect from July 5.