Weak rand will keep fuel prices high, says AA
WITH the international oil market stable, rand weakness is likely to be the dominant factor in fuel pricing for the year, according to the AA.
“Factors affecting the fuel price have rarely been more finely balanced than they currently are,” the AA said.
“We consume under 1% of the world’s daily oil demand.
“Even a total boycott of petroleum fuels in South Africa would be unlikely to affect world prices, so the country has little scope for influence.
“Recent tensions between Iran and the US rattled the markets into a price spike of several dollars a barrel, showing where the influence truly lies.”
Closer to home, the AA says the key problem remains economic policy.
The association says tax revenue undershoots, infrastructure underspend, de-industrialisation and ongoing power blackouts have counteracted entreaties by President Cyril Ramaphosa for investment.
“Capital follows returns and if South Africa is downgraded to junk status the rand is likely to weaken further, offsetting returns.
“This increases the possibility of rand weakness accelerating while capital investment seeks other harbours.”
The AA said these factors were negative for the rand and likely to offset any stability in the oil price.
“We do not foresee declines in the oil price sufficient to offset rand depreciation, and we cannot rule out the possibility that fuel prices may test previous highs this year,” the body said.