Stronger rupee pulls fuel prices down |05 May 2021

• Prices fall by 16% at pump

A significant drop in petrol prices has been witnessed since the last week of March with the dollar at the core of this decrease. This turnaround in fuel prices has triggered an across-the-board reduction of both motor gasoline and gasoil.

Motor gasoline dropped by over 16% from R22.89 on March 15, to R19.20 per litre this week representing a fall of R3.69 per litre. Gasoil or diesel price which was at R21.69 at the beginning of April was down 17% to R17.89 this week which is a reduction of R3.80 per litre. It is the first time since January that these commodities have gone under the psychological mark of R20.

“The exchange rate of the rupee is continuing its strengthening trend against the US dollar and this means motorists have a breather in May from the series of fuel price increases earlier in the year,” Sarah Romain, Seypec general manager, commercial told Seychelles NATION. “We very often report on increase in prices, and we believe it is most appropriate to explain the economics of a drop in prices too. The parity of the rupee to the dollar is the main factor causing this fall in the prices at the pump.”

With the Seychelles rupee gaining nearly 32% against the dollar that Seypec pays to its supplier since the last week of March and all taxes & margins remaining fairly constant, the prices of motor gasoline and gasoil have been adjusted accordingly. While global oil prices have spiked from November 2020 to March of this year, the past week has been relative stable. “We must only hope this recent sequence of price stability will continue to provide more price relief to fuel users in the short to medium term,” Mrs Romain said. “If at any time we start having volatility on the market, we might well suffer in Seychelles.”

Globally, oil prices fell on Monday as the catastrophic second wave of a coronavirus epidemic in India reduced the recovery in oil demand there. This sanitary situation in India is offsetting optimism regarding a strong rebound in demand in developed countries and China in the second half of the year. Crude oil was traded around the 65-dollar tag at the beginning of this week. India is the world's third largest consumer.

“In Seychelles, we are always on the alert about changing prices on the world market. Apart from looking for the best purchase conditions from our supplier, we want to pass on all benefits to our users when prices fall but at the same time, we cannot sustain the same prices when our imports are more expensive,” Mrs Romain explained.

However, the roll out of vaccination campaigns in the other parts of the world is expected to lift oil demand, especially during peak travel season in the third quarter. Energy analysts say that crude oil is well on its way to hit the 70-dollar level by the third quarter of the year with OPEC+ (the Organisation of the Petroleum Exporting Countries) and its partners surely opting for a tightening of production in the coming months. Other factors like the Iran sanctions dossier, the situation in Libya and Venezuela can also easily disrupt the markets overnight causing a boost in the crude oil prices.

But for the moment, as the exchange rate of the rupee is performing well, users are taking full advantage of the lower prices at the pump.