Journal of Engineering and Applied Sciences 15 (2): 602-606, 2020 ISSN: 1816-949X © Medwell Journals, 2020 Statistical Forecasting of Petrol Price in South Africa Matthew Femi Olayiwola and Solly Matshonisa Seeletse Department of Statistics and Operations Research, Sefako Makgatho Health Sciences University, Molotlegi Street, Ga-Rankuwa, South Africa Abstract: This study focuses on the commercial patterns of petrol price in South Africa. Its aim is to determine the continuity of past patterns of the petrol price series into the future using time series techniques. About 14 years monthly-based retail fuel prices of unleaded 95 petrol were collected from the Department of Energy, South Africa. Price settings on consumer goods are used for economic growth. On the other hand, sudden price fluctuations inconvenience consumers. Also, price increases reduce disposable cash for the consumers. These patterns reduce wealth and for the average consumer they may lead to poverty. The study results show that in South Africa, the upward trend variation continues into the future petrol price in a quadratic rate while there are also some indications of seasonality of petrol price. Key words: Autocorrelation function, correlogram, fuel price, stationarity, economic growth, South Africa INTRODUCTION Countries regulate their economies by putting laws to regulate activities of the economy. One such control is fuel regulation. In South Africa, the South African government controls wholesale margins and controls the retail price of petrol through the Department of Energy (South Africa, 2008, Anonymous, 2008, 2009). The laws are determined in line with countries that exchange trade on same matters. South Africa trades with Europe and the USA, among other nations. Hence, the price of petrol in South Africa is associated with the price of petrol in US dollars in certain international petrol markets. The South Africa Yearbook (2008/09) explains that this pattern of associations is an indication that the domestic price is also influenced by supply and demand for petroleum products in international markets as well as by with the rand/dollar exchange rate. The fundamental philosophy for the foundation for establishing the Basic Fuels Price (BFP) is to represent realistic, market-related costs of importing a considerable quota of South Africa’s liquid fuels supplies (Mondliwa and Roberts, 2014). Therefore, such supplies are obtained from overseas refining centres that can satisfy South Africa’s requirements of product quality and sustainable supply considerations. The import parity BFP principle is a well-designed, complete method of BFP determination to ensure that local refineries compete with their international counterparts. This promotes cost-effectiveness and intelligent rough acquisition strategies to ensure survival in a volatile and competitive international environment. As a result, this leads to elimination of domestic inflationary pressures. The BFP of petrol, diesel and illuminating paraffin is calculated on a daily basis. These daily calculations are either higher or lower than the BFP values reflected in the fuel price structures at that time. If the daily BFP is higher than the BFP in the fuel prices, a unit under recovery is realised on that day. When the BFP is lower than the BFP in the price structures, an over recovery is realised on that day. An under recovery therefore, refers to when fuel consumers are paying less for a product on that day. On the other hand, in an over recovery situation, consumer are paying more for product on that day. These calculations are done for each day in the fuel price review period and an average for the fuel price review period is calculated. This monthly unit over/under recovery is multiplied by the volumes sold locally in that month. The cumulative over/under recovery is recorded on a cumulative over/under recovery account (referred to as the “Slate account”). A Slate levy is applicable on fuels to finance the balance in the Slate account when the Slate is in a negative balance (Lloyd, 2001). This study focuses on determining the continuity of commercial patterns of the petrol price into the future by first decomposing the series and then forecast for short-term period. Therefore, this study uses time series techniques. Time series procedure: A common approach to examine a regular time series occurs by use of a line chart, also known as the time plot. Generally and for most time series data, this plot exposes the nature of the trend immediately and can also reveal the absence of a trend. Also, when the time series are arranged in a convenient Corresponding Author: Solly Matshonisa Seeletse, Department of Statistics and Operations Research, Sefako Makgatho Health Sciences University, Molotlegi Street, Ga-Rankuwa, South Africa 602