The Automobile Association (AA) says that the petrol price could rise by an estimated 16 cents in February as South Africa’s rand/dollar exchange rate continues to take the shine off international oil price weakness.
This is based on unaudited mid-month data released by the Central Energy Fund (CEF), the association said.
The oil price fell below $30 a barrel this week; however, the rand has started 2016 on the back foot, down 6% against the greenback.
In afternoon trade on Friday, the local unit traded at R16.65 against the dollar, having slumped to a record low of R17.9950 on Sunday (10 January).
Senior researcher at Solidarity Research Institute, Paul Joubert, said that the current outlook for fuel prices is that the price of 95 octane petrol will rise by about 8 cents per litre on 3 February, while 93 octane will rise by approximately (5 cents).
He noted that the AA takes an “average so far” which does not take into account the inevitable fact that there’s still a period to come.
“The wholesale price of diesel, though, is likely to see a significant decrease of about 58 cents per litre. This difference between petrol and diesel is possibly because of a warmer than usual winter in the Northern Hemisphere so far, reducing demand for heating fuel,” Joubert said.
Diesel prices decreased by 78 cents in January.
The effect of the plummeting rand value has been cancelled out by the oil price which has been plummeting equally during the month so far. However, in this volatile environment, it is very difficult to predict what will happen by the end of the month.
“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 AA said.
“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-a-litre 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 AA said.
“The exchange rate’s ongoing weakness might mean trouble for the fuel price if oil prices begin to tick up again,” the association 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,” it said.