Pretoria - The combination of a strengthening Rand and weakening crude oil price is boding well for South African motorists with the price of fuel set to drop substantially at midnight on Tuesday.
According to the Department of Minerals and Energy, the retail price of unleaded 91 octane petrol will decrease by 137 cents a litre.
Unleaded 93 octane petrol and lead replacement petrol will decrease by 136 cents a litre, while unleaded 95 octane petrol and lead replacement petrol will decrease by 134 cents a litre, the department said.
Between 28 November 2008 and 1 January 2009 the Rand/dollar exchange rate strengthened to R9.95 from R10.18 in the previous cycle, the department reported.
While the price of Brent Crude Oil slumped to dismal lows of around $40 per barrel in mid-December 2008, the price of oil jumped to just over $50 per barrel on Tuesday, raised by uncertainty in the market due to ongoing conflicts in the Middle East.
The movement of Israeli ground forces into the Gaza strip recently and with no mutually agreeable peace settlement in sight between Israel and Hamas in Palestine, the markets concerns over supply has raised the price of oil.
The change to fuel prices as of midnight will take prices back to March 2007 levels.
The lower oil price and strengthening rand is also set to ease South Africa's inflationary outlook, giving a positive notion to the beginning of 2009.
Many South Africans will be hoping that the economic environment will have the Reserve Bank's Monetary Policy Committee (MPC) favouring an interest rate cut when they meet again in February 2009.
Reserve Bank Governor Tito Mboweni lowered the repo rate by 50 basis points or 0.5 percent to 11.5 percent when the MPC last met in December 2008 citing some notable improvements to the inflation outlook.
The governor did, however, warn that risks posed by uncertainty with regard to the exchange rate, in particular, remain.
With an unchanged monetary policy stance, inflation is expected to continue its downward trajectory to return to within the 3 - 6 percent inflation target band by the third quarter of 2009.
Inflation is expected to average 6.2 percent and 5.6 percent in 2009 ad 2010 respectively and then average 5.3 percent in the final quarter of 2010.
