SA losing out on low fuel prices owing to rand
SOUTH Africa’s dwindling rand versus the US dollar exchange rate continues to put a damper on the ongoing international oil price weakness.
This is according to unaudited mid-month data released by the Central Energy Fund (CEF).
It comes amid Saturday’s news that the US and EU sanctions against Iran had been lifted.
Crude oil prices have dipped to well below $30. Reports stated that Iran would now be increasing oil exports with an extra half a million barrels a day.
The CEF report stated that the weakening rand increased the contribution to basic fuel prices on petrol, diesel and illuminating paraffin respectively by R29.26/litre, R25.2/litre and R25.81/litre.
“Had the exchange rate remained flat in 2015, South Africans would currently have been paying, on average, 45 cents a litre less at the pumps,” the Automobile Association said.
The AA noted that the rand had lost about one-third of its value against the US dollar in 2015.
“This deficit has widened by another 32 to 40 cents in the first two weeks of January 2016, turning what would have been a 24 cents-alitre drop in petrol at the end of the month into a potential rise of up to 16 cents.”
An oil price benefit of around 90 cents a litre to the diesel price has instead been muted to around 58 cents a litre by the exchange rate, with illuminating paraffin showing a similar picture. “The exchange rate’s ongoing weakness might mean trouble for the fuel price if oil prices begin to tick up again,” the AA said.
“At the current rand/dollar exchange rate, a return to oil’s highs of 2013 and 2014 would result in the fuel price approaching R20 a litre, putting yet more pressure on South Africa’s already-strained economy,” the AA added.
Econometrix chief economist Dr Azar Jammine said that with oil prices below $30, it should have an impact on the petrol price. But due to the rand’s performance, the petrol price will not drop dramatically.