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January retail petrol price could be cut

The Department of Minerals and Energy could implement a retail petrol price cut of some 80 cents per litre (c/l) on 7 January 2009 and a wholesale diesel price cut of some 90c/l, provided the daily over-recovery remains at or above the 3 December level.

This would bring the total cut to 405c/l since the retail petrol price peaked at 1070c/l in July in Gauteng.

The price was cut by 30c/l in August, 74c/l in September, 25c/l in October, 45c/l in November and by a massive 161c/l in December.

South Africa's daily unleaded petrol price over-recovery was 59.282c/l and the diesel over-recovery was 81.501c/l on 3 December.

An over-recovery means that the basic petrol price based on the daily product price and exchange rate is less than the basic fuel price used in the calculation of the monthly retail petrol.

An over-recovery therefore implies that the retail petrol price can be lowered at the next monthly price adjustment, provided the government does not introduce a new levy or raise either the wholesale or retail margin.

The retail petrol price is adjusted monthly on the first Wednesday of the month in accordance with the previous averaging period's over- or under-recovery.

The current averaging period runs from 28 November to 31 December and a price announcement is due on 2 January. The average over-recovery for the period 28 November to 3 December for petrol was 163.815c/l and for diesel was 128.693c/l.

The OPEC Reference Basket (ORB) of 13 crude oils saw its price drop from a record US$140.73 per barrel on 3 July 2008 to $55.90 on 28 October before recovering to $58.94 on 5 November, after OPEC implemented a 1.5 million barrel per day output cut from 1 November.

Its recovery was however brief as it moved back below $50 on 12 November and sank to $40.75 on 3 December.

Prior to 12 November 2008, it reached a cyclical low of $48.65 on 12 January 2007. Its move below $50 on 11 January 2007, was the first move below $50 per barrel in 19 months.

The ORB is made up of the following crude oils: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Minas (Indonesia), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and BCF 17 (Venezuela).

South Africa's international petroleum product prices are closely correlated with the ORB, rather than Brent or Nymex crude oil futures prices, which tend to be higher than ORB.

Published courtesy of

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