Crude oil cuts will raise fuel prices

The Witness - Wheels - - MOTORING -

SURG­ING in­ter­na­tional petroleum prices are likely to hit South Africans hard at the pumps at the be­gin­ning of 2017.

This is the view of the Au­to­mo­bile As­so­ci­a­tion (AA), which was com­ment­ing on unau­dited mid-month fu­el­price data re­leased by the Cen­tral En­ergy Fund (CEF).

“Saudi Ara­bia has in­di­cated that its crude oil pro­duc­tion cuts may go be­yond those pro­posed in Novem­ber,” the AA said.

“There are also sig­nals that non-Opec mem­bers may vol­un­tar­ily de­crease pro­duc­tion, which has the po­ten­tial to fur­ther bol­ster in­ter­na­tional petroleum prices.”

The first fort­night of De­cem­ber showed a strong ap­pre­ci­a­tion in oil prices, while the rand re­mained volatile against the U.S. dol­lar. Based on the cur­rent data, the in­dica­tive in­crease in fuel prices at the end of De­cem­ber will be around 27 cents a litre for petrol, 21 cents for diesel and 28 cents for il­lu­mi­nat­ing paraf­fin.

The AA warned that the im­pact of pro­duc­tion cuts was not fac­tored into cur­rent oil prices.

“If the oil-pro­duc­ing coun­tries ad­here to the pro­posed pro­duc­tion cuts, oil prices are likely to strengthen un­til de­mand and pro­duc­tion move back into equi­lib­rium,” the as­so­ci­a­tion said.

“Even a stronger rand could be over­pow­ered by a sharp climb in the oil price, po­ten­tially mean­ing a suc­ces­sion of fuel price hikes, which could strongly im­pact the econ­omy over the next few months.” — WR.

PHOTO: FILE

Ex­pect a sharp rise in fuel prices next month.

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