SA could see smaller fuel price in­crease next month

The Witness - - YOUR MONEY -

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.

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