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The Department of Energy announced an over-recovery for the month of October, which saw a resilient rand strengthening against the US dollar, and significant declines in the price of oil. From 5 November, the price of all unleaded and leaded replacement petrol (LRP) will decrease by 45 cents per litre (c/l), while prices for diesel will go down 61c/l for 500ppm, and 60c/l for 50ppm..
At R12.98/litre for 93 octane unleaded (at the reef), the fuel price is now at the lowest point for 2014. Earlier this year higher oil prices, instability in the economy, and a struggling currency saw a number of price increases. At its highest, in April, 93 octane unleaded cost R14.16/litre. November pricing represents a 9% drop from that high.
“Despite a wildly fluctuating petrol price throughout 2014, economic conditions and world events have transpired to give us the lowest petrol price for this year, to date,” said Rudolf Mahoney, head of research at WesBank. “Petrol prices have been a significant concern, affecting buyer confidence and putting added pressure on household budgets.”
WesBank’s mobility cost calculator tracks the impact of petrol pricing on consumers’ budgets with data going back to 2007. The cost of a new, entry-level vehicle in that year was R100 000, and with compounded annual consumer price inflation (CPI) its cost today would be R137 390.
Using this vehicle’s purchase cost, fuel consumption of 7 litres per 100km, and a monthly travel distance of 2 500km, data shows that fuel costs have increased by 188% over the last seven years. Monthly costs comprise fuel, the vehicle’s instalment, insurance, and e-toll fees – the latter having been introduced in December 2013.
Presently, monthly fuel costs for the sample entry-level vehicle work out to R2 271.50, or 37.47% of the total cost, while the instalment of R2 490 represents 41.08% of the total cost. At a maximum of R450 per month, e-tolls represent 7.42% of the monthly motoring budget, and insurance premiums account for the remainder of the cost basket.
“Compared to seven years ago, the sample vehicle’s monthly repayment has grown 7.8%,” said Mahoney. “However, monthly fuel costs have increased drastically. Fuel economy now plays a larger role in vehicle selection and fuel costs are set to become the biggest motoring expense for buyers in the entry-level segment.”
However, with November’s lower fuel prices year-on-year total costs for mobility have only increased marginally for the majority of the country. Compared to November last year, the cost basket has increased by 1.9% – or R105.16 – excluding the R450 capped cost for e-tolls in Gauteng.
To offset fuel price increases, until now, consumers have benefited from longer contract periods, low interest rates, and relatively low CPI on new cars. Together, these have prevented a drastic increase in monthly repayments. With fuel prices now stabilising, the situation is set to reverse. The average contract period is approaching the maximum limit of 72 months and new vehicle pricing is about CPI.
“Should we experience another petrol price shock, as seen in the past five years, it would drastically affect buyer confidence,” said Mahoney. “It would be the perfect storm – unaffordable vehicles, and high mobility costs – and new vehicle sales would definitely take a hit.”