Johannesburg - The petrol price could drop by between 90c and R1 a litre next month, which would boost growth in real household disposable income, according to estimates by Azar Jammine, the chief economist at Econometrix.
The Department of Energy on Monday projected a R1.03 a litre fall on January 7.
Such a decline would take the Gauteng petrol price to R11.44 a litre, which would be the lowest since August 2012, from R12.47 a litre at present. The Gauteng petrol price peaked at a record R14.39 a litre in April.
Jammine said the drop in the petrol price was as a result of falling crude oil prices.
However, the rand fell steeply against the dollar last week, hitting a six-year low of R11.72 on fears that Fitch could downgrade South Africa’s debt ratings.
“Things can change a lot between now and the end of the month,” he said.
A massive drop in the petrol price will be a boon to consumers, increasing their disposable income just after the festive season when most people are on holiday and travel long distances. It will also be positive for the inflation outlook, as well as interest rates.
Elton Bosch, the general manager of NUS Consulting’s South African operations, said on Tuesday: “We expect crude oil prices to come down slightly within the next few months. But if the rand continues to fall against the dollar, that nullifies the oil price drop. “
On Tuesday at 5pm, the rand was bid at R11.7279 as major currencies retreated against the greenback.
Oil prices have dropped almost 50 percent since June, an indication that global growth is weak.
In June, Brent crude reached a peak of $115.71 (R1 344.63) a barrel before falling below $59 yesterday for the first time since May 2009.
David de Waal, the chief executive of Steeple estate agents, said on Friday that the petrol price had dropped to its cheapest level this year, following a decrease of 69c at the beginning of December.
“This comes as a welcome relief to consumer bank balances, following a year of rate hikes and food cost increases.”
Headline consumer inflation came within the SA Reserve Bank’s target band of 3 percent to 6 percent when it moderated to 5.9 percent in October and 5.8 percent in November.
Izak Odendaal, an investment analyst at Old Mutual Wealth, said: “This will give policymakers some breathing space, as part of the work of raising real interest rates will be done by lower inflation.”
He said falling oil prices gave central banks worldwide similar leeway.
Odendaal said South Africa’s real interest rate remained low compared with other emerging markets.
He said South Africa’s current account deficit was one of the largest at 6 percent of gross domestic product.
“Therefore, the SA Reserve Bank is expected to continue gradually increasing interest rates,” Odendaal said.
De Waal said lower petrol prices would increase consumers’ disposable income and help make a home more affordable. Increased demand for property would, at the least, help support current prices.