long drop delerium
21 August 2008

A "big drop" in the petrol price is expected in September, T-Sec economist Mike Schussler said on Wednesday.  "I see petrol dropping around R1 per litre or even more," Schussler said. He expected diesel to drop by R1.45 a litre.  However, even if the decrease in the petrol price was as large as expected in September, petrol would still be up 38 percent compared with a year ago, he added.

He expected petrol to drop month-on-month by 9.6 percent the largest month-on-month drop in the last 10-and-a-half years.  Diesel would see a month-on-month drop of 14.1 percent the biggest month-on-month decrease in two decades.  The drop in the diesel price would be important for South Africa's economy, Schussler said.  "We have a lot of land transport here, while the big cities in Europe have waterways."

However, the economy would still feel the high cost of diesel for a few months.   "If the drop in diesel prices is the beginning of a trend, then this would become important for inflation it would delay second round inflation fears," he said.

As far as the oil price was concerned, Schussler said there was still a concern that oil prices would rebound in the fourth quarter. "Winter is coming in the northern hemisphere and the hurricane season only ends in November," he said.  The world still had tight supply-demand ratios and politics in the Middle East could affect oil prices. Oil was one of the most difficult commodities to price this year, he added.   "Depending on the demand-supply situation, I see oil at between $80 to $125 at the end of this year," Schussler said.

Sapa,  http://business.iafrica.com