In a welcome development for cash-strapped consumers, the Department of Mineral Resources and Energy (DMRE) has announced a decrease in the prices of petrol, diesel, and paraffin.
The adjustments, which will come into effect on Wednesday, are expected to provide some relief at the pumps and alleviate financial burdens on motorists.
According to the DMRE, both grades of petrol will see a decrease of 71 cents, while diesel with 0.05% sulfur content will see a decrease of 84 cents, and diesel with 0.005% sulfur content will go down by 80 cents.
Wholesale illuminating paraffin will cost 43 cents less, and the Single Maximum National Retail price for illuminating paraffin will decrease by 58 cents. However, the Maximum LP Gas Retail Price will increase by 75 cents.
Factors That Have Led To Fuel Price Decrease
The downward adjustment in fuel prices can be attributed to several factors. The DMRE noted that the average international product prices of petrol, diesel, and illuminating paraffin have followed the decreasing trend of crude oil prices during the period under review.
Despite increased demand ahead of the driving season in the Northern Hemisphere, petrol and diesel prices decreased. However, the price of LPG increased due to the rise in Butane prices.
The DMRE explained that these factors resulted in lower contributions to the Basic Fuel Prices of petrol, diesel, and illuminating paraffin. The respective decreases amounted to 125.11 cents per liter, 133.83 cents per litre, and 94.95 cents per litre.
The decrease in the cost of Brent Crude Oil also played a role in the lowered fuel prices. Several global factors influenced this reduction.
Firstly, the release of Chinese Purchasing Managers Index (PMI) data indicated lower economic growth, although there was still an increasing demand for crude oil imports to China, albeit at a slower pace compared to April 2023.
Secondly, the collapse of First Republic Bank in the United States created uncertainty and raised fears of another financial crisis.
Thirdly, the passing of the US debt ceiling bill boosted confidence in the ability of the US government to meet its financial obligations, preventing further decline in crude oil prices.
Lastly, unexpected inventory builds despite the announced production cuts by OPEC+ in April 2023 have left the market uncertain about potential further cuts to be discussed at the upcoming June 2023 meeting.
The decrease in fuel prices will likely ease the financial burden on motorists and offer some relief for households dependent on paraffin for heating and lighting purposes.