SA could see smaller fuel price increase next month
IF the rand remains stable against the dollar over the next few weeks, consumers could see a smaller than expected increase in the fuel price in August, Jana van Deventer, head of financial markets at ETM Analytics, said yesterday.
She said that based on the latest data from the Central Energy Fund (CEF), it seems consumers could face a fuel price increase of eight cents per litre in August. This is as a result of the weaker average rand/dollar exchange rate, which fully offset lower international oil prices, she said.
The price of petrol decreased by up to 69c a litre at the beginning of July, while the price of diesel dropped by 60c. The Department of Energy cited the strengthening of the rand against the dollar as the main reason for the decrease. This followed a petrol price breather of 25c a litre in June after it increased 30c a litre in May.
“Even if we do see the fuel price increase in August, fuel prices are still relatively low compared with earlier this year and it is unlikely this will exert too much pressure on SA consumers,” said Van Deventer.
“Through the next two weeks ... ongoing rand resilience might help reduce the underrecovery on the basic fuel price.”
At 1.40 pm yesterday, the rand was trading 0,625 firmer at R12,95 to the greenback.
Momentum Investments economist Sanisha Packirisamy said the CEF’s data shows the current underrecovery at eight cents per litre on 95 grade fuel prices. “The dollar oil price amounted to a nine cents per litre overrecovery due to lower international oil prices on a monthtodate basis, while the rand depreciation contributed to a 17c/l underrecovery.”
The rand weakened in the first half of July on proposals to review the SA Reserve Bank’s mandate.
“International oil prices are reflecting sideways demand, an overhang in oil in ventories and increasing supply.”
Packirisamy said the deal brokered by the Organisation of the Petroleum Exporting Countries failed to prop up oil prices as agreedupon production cuts were made after supplies were ramped up, while U.S. shale producers are lifting supply as prices remain in excess of their breakeven rates.
“We are not expecting a major move higher in international oil prices over the next year, given the relative supply overhang,” she said.
Rand volatility, thanks to domestic political and ratings concerns, could exert pressure on petrol price inflation in upcoming months, she said.