File picture: Denis Farrell

Embattled consumers might be in for a reprieve at the petrol pump as the petrol price could drop by as much as 79c a litre at the beginning of next month.

This good news comes on the back of a report yesterday that consumer price index (CPI) inflation slowed to 6.3 percent last month, lower than consensus forecasts.

In a note to clients, Azar Jammine, the chief economist at Econometrix, said yesterday: “As of today, the daily over-recovery on the petrol price is 79c a litre and the average over the first 19 days of the month was 68c a litre.”

The petrol price was kept at a standstill this month.

Jammine said the situation had arisen as a result of a fairly substantial decline in the international price of oil to its lowest level in 14 months, at just above $100 (R1 062) a barrel of Brent crude, while the rand had not weakened any further.

He said declining growth in Europe had reduced the demand for crude while, on the other hand, there had been excess production in the US and the North Sea.

In addition, prospects were that Libya’s oil exports would pick up soon.

“Finally, the territorial advances towards the south of the country being made by the Islamic State fundamentalists in Iraq have been halted with the help of renewed US military intervention, thereby preventing the movement from taking over Iraq’s richest oil fields,” Jammine said.

He said such a reduction in the petrol price would leave it virtually at the same level as it was in September last year.

“On its own, this could be sufficient to take inflation back down to below the 6 percent upper end of the inflation target by the time September’s inflation figure is released in October. The Reserve Bank will find it increasingly difficult to justify interest rate hikes as it had insinuated it would do, if inflation were to fall back to within the inflation target.”

Statistics SA said yesterday that inflation slowed to 6.3 percent in July from a peak of 6.6 percent in June and May.

Nedbank said: “We expect inflation to remain above the Reserve Bank’s 6 percent upper target range for the remainder of the year.

“The biggest risk to the inflation trajectory remains the rand. Inflation pressures will, though, be mitigated by the recent slowdown in global food prices as well as the drop in oil prices.

“Next month’s inflation release will show that petrol prices remained flat for the first time since January 2009.”

Most municipalities updated tariffs in July each year, resulting in housing and utilities contributing 0.5 percentage points of the 0.8 percent monthly increase in the CPI, Stats SA said.

Electricity tariffs increased 7 percent, slightly lower than the maximum 7.4 percent authorised by the National Energy Regulator of SA.

The petrol price increased by a moderate 0.29c in July, bringing the annual increase in petrol down to 8.3 percent from the short term peak of 14.3 percent two months ago.

Stats SA said food inflation appeared to be moderating as prices dropped month on month in bread and cereals (minus 1 percent, meat (minus 0.3 percent) and fats and oils (minus 1.4 percent).

The drops were largely as a result of improved harvests of grains (maize and wheat) and oil-bearing plants (sunflower). Maize is a large part of feed for cattle and chickens.