HUGE FUEL PRICE COMING
SUBSTANTIAL hikes in the price of fuel are likely at the end of the month, with a mid-month estimate already pointing to an increase of 87 cents a litre for petrol and a 58c per litre for diesel, the Automobile Association (AA) has warned.
Mid-month data indicated that the price of illuminating paraffin was set to increase by at least 56c per litre.
This follows last month’s steep increases of 29c per litre for petrol, 42c per litre for diesel and 48c per litre for illuminating paraffin.
The AA said late last week that the looting and unrest had caused the rand/dollar exchange rates to rise from R14.35 to nearly R14.80 since June 12, while the international price of oil had continued to advance.
“Fuel prices were already trending higher before the widespread looting and unrest of the past few days. But now the daily rand/dollar exchange rate has spiked from R14.35 to nearly R14.80 since June 12. South Africa imports a lot of fuel, which will inevitably cost more in rand terms. Meanwhile, international oil prices remain on the advance, adding further pressure,” according to the AA.
The Brent spot crude oil price was trading 4.6 percent lower at $73.16 per barrel on Friday afternoon, slightly below the $75.84 at which it was trading on July 1, but nevertheless a substantial 67.4 percent up from the price a year ago.
According to reports, a recovering global economy, slower oil supply mainly because of market rebalancing by Opec countries, a weaker dollar and strong commodity prices have all contributed to the strong rise in global oil prices.
The AA said it did not expect the rising prices to decrease before the end of the month. “While the supply of fuel will not push the prices of fuels higher, the weakening rand as a result of the riots will play a major role, as the exchange rate is a key indicator for the local fuel price,” it said.
The AA said that needless rand weakness driven by the government’s ineffective response to the crisis would hit vulnerable citizens first and hardest. “People who use paraffin for heating, lighting and cooking are rarely in a financial position to absorb large price hikes,” the association said.
Meanwhile, oil price futures eked out modest gains on Friday, after suffering pronounced losses earlier this week, Xinhua News reported.
The price of West Texas Intermediate for August delivery added 16c, or 0.22 percent, to settle at $71.81 a barrel in New York. The price of Brent crude for delivery in September increased by 12c, or 0.16 percent, to close at $73.59 a barrel on the London ICE Futures Exchange.
Prices had been under pressure since Wednesday, amid concerns over the possibility of more crude supplies and risks to the demand outlook. For the week, the US crude benchmark fell 3.7 percent and Brent declined 2.6 percent, based on the front-month contracts.