Fuel price rise adds to downgrade woes
SOUTH African motorists will have to pay 49 cents per litre (c/l) more from May 3, according to the Central Energy Fund.
The hike in the retail petrol price is due to the weakening in the rand subsequent to the cabinet reshuffle and the consequent ratings downgrade.
In addition there was a rise in the international oil price following an increase in geopolitical tensions regarding Syria and North Korea, according to independent agricultural economist Fanie Brink.
The average daily petrol under-recovery for the period March 31 to April 25 has been
49.221c/l
An under-recovery means that the basic petrol price, based on the daily product price and exchange rate, is more than the basic fuel price used in the calculation of the monthly retail petrol.
As of April 25, the weakening of the rand contributed 28.834c/l to the average under-recovery, while the rise in the international oil price contributed 22.834c/l.
The good news is that the rand’s recovery since, almost touching R14 to the greenback in mid-April, as well as an easing in oil price, could result in a reversal of May’s fuel price increase in June as the April 25 basic fuel price of 567c/l was similar to the basis fuel price of March.
If that were to happen, then the year ago change in the Gauteng retail petrol price would go from 5.4 percent in April to 8.2 percent in May and only 0.3 percent in June.
The similar changes for the wholesale price of diesel would be 9.1 percent, 12.1 percent and 1.8 percent.
This would be especially good news for farmers who do most of the fuel-intensive harvesting of the maize crop in June.
As a bumper maize crop is expected to drive down food inflation, the June consumer inflation rate could be well within the SA Reserve Bank’s inflation target range of 3 percent to 6 percent.
This could enable the Monetary Policy Committee (MPC) to cut the repo rate by 25 basis points at its July meeting.
One member of the MPC voted for a 25 basis points cut at the March meeting.