CURRENT data is predicting a drop in fuel prices at the end of July South Africa‚ but the Automobile Association (AA) says motorists may not see the full benefit of this because of instability in the rand-dollar exchange rate.

The decrease could have a knock-on effect on Lesotho as the country’s fuel prices are usually at par with South Africa.

“The good news is that preliminary data from the Central Energy Fund (CEF) for the middle of July is showing firm reductions in international petroleum prices‚” the AA said in a statement.

“The exchange rate picture is less positive‚ with the Rand having steadily depreciated against the US dollar since the end of last month.”

After a period of stability towards the last week of June‚ the exchange rate has climbed from R12.20 to the dollar to almost R12.40 to the dollar.

The drop in international petroleum prices has kept ahead of the exchange rate though – meaning that petrol is currently in line for a reduction of 28 cents a litre‚ with diesel and illuminating paraffin set for a decline of around 50 to 55 cents a litre. However‚ the AA cautioned that a flattening of international petroleum prices or continued depreciation of the Rand against the dollar could reverse this trend.

“The fuel price has shown increasing volatility in recent months‚ and we advise motorists to maintain a prudent stance towards their fuel expenditure‚” the AA said.

Paul Joubert, senior researcher at Solidarity Research Institute said that the retail prices of both octanes of petrol are currently likely to decrease by about 30 cents per litre, come August.

The wholesale price of diesel could decrease by as much as 60 cents per litre in August.

“These figures will likely still change as the month goes on, especially considering the current volatility due to the Greek bailout situation,” the researcher warned.

“So far during July, the average international price of petrol has decreased, but the rand has, on average, been slightly weaker against the dollar than it was on average during June.”

“The international price of diesel has decreased more than that of petrol, as the demand for diesel usually drops during the Northern Hemisphere’s summer months,” Joubert said.

The International Energy Agency said widespread over-supply had led to prices dropping below $60 a barrel and this trend is set to continue.

The agency said lower oil prices are likely to last well into next year because of the massive over supply.

It said the world oil market is battling to absorb the huge volumes of oil now being produced.

This will be welcome relief for South Africans who have seen a number of significant fuel price increases since January this year.

Core members of the Organisation of Petroleum Exporting Countries have continued to produce the same level of oil over the past year despite falling oil prices in an attempt to regain market share.

But US oil production has also soared in recent years and fracking has dramatically changed demand in the country.

The fall in prices has also led to oil firms cutting back on exploration as demand falls. – EWN/Staff Writer