Pleasure at the pump

The Department of Minerals and Energy (DME) could implement a retail petrol price cut of some 80 cents per litre (c/l) on January 7 2009 and a wholesale diesel price cut of some 90 c/l, provided the daily over-recovery remains at or above the December 3 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 59.282 c/l and the diesel over-recovery was 81.501 c/l on December 3.

Over-recovery

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

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I-Net Bridge, www.iafrica.com, 4 December 2008