This is down significantly from the 80 cents per litre cuts projected just a week ago<\/strong><\/a>.<\/p>\n\n\n\n According to Investec chief economist Annabel Bishop, the rising oil price and the weakening local currency have been the main culprits in eroding the potential cut in November.<\/p>\n\n\n\n South Africans have become accustomed to price cuts in recent months, driven by a stronger rand and lower oil prices.<\/p>\n\n\n\n The government is also on a strong drive to reassess how it calculates the petrol and diesel prices to drive down fuel costs for consumers.<\/p>\n\n\n\n However, nothing has changed to date. This means that petrol and diesel prices are still driven by international oil prices and the rand\u2019s strength against the US Dollar.<\/p>\n\n\n\n Bishop said the Brent crude price moved above US$80\/bbl this week and above R1 400\/bbl as the rand weakened as well.<\/p>\n\n\n\n International oil prices climbed due to worries that Iranian oil supplies and energy facilities would come under attack.<\/p>\n\n\n\n Bishop said that although Brent crude has seen higher prices this year, the recent price weakness has been quite rapid.<\/p>\n\n\n\n \u201cThe rapid rise in geopolitical risks has seen the oil price climb from around US$70\/bbl at the end of September,\u201d she said.<\/p>\n\n\n\n Comments from OPEC+ recently that Brent crude should be around US$80\/bbl have also contributed to the price rise.<\/p>\n\n\n\n The rand remains a volatile currency, reaching R17.64\/USD on the escalation in geopolitical tensions, from R17.03\/USD at the end of September.<\/p>\n\n\n\n Bishop added that a cautious tone from the Federal Open Market Committee (FOMC) on the pace of US interest rate cuts also a factor.<\/p>\n\n\n\n The US dollar has seen some strength, and emerging market and commodities\u2019 currencies weakness, with the rand falling into both categories.<\/p>\n\n\n\n \u201cMarkets had hoped for a quicker US rate cut cycle, but risk assets have recently weakened in disappointment,\u201d she said.<\/p>\n\n\n\n The rand oil price has climbed by 7% for the first seven days of October compared to the same period in September.<\/p>\n\n\n\n Bishop warned that if oil prices continue to rise and the rand weakens November could see a petrol price hike instead of the anticipated cut.<\/strong><\/p>\n\n\n\n Bishop explained that higher petrol and diesel prices significantly affect the economy, including driving up inflation.<\/p>\n\n\n\n The recent rise in oil prices has raised concerns about inflation, adding to market expectations that the US rate cut cycle will not be sharp.<\/p>\n\n\n\n Higher inflation in the United States and lower rate cuts bolster the US dollar and weaken the rand.<\/p>\n\n\n\n Petrol price changes also directly affect South Africa\u2019s CPI inflation outcomes\u00a0in the month they occur.<\/p>\n\n\n\n Bishop explained that fuel prices are the fourth biggest driver of inflation in South Africa,\u00a0and so have a notable impact.<\/p>\n\n\n\n The petrol price was cut by R1.14\/litre in October and by 92c\/litre in September, which will help keep CPI inflation lower in those months.<\/p>\n\n\n\n September has been expected to see inflation fall closer to 4.0% y\/y, and October below 4.0% y\/y, with suppressing base effects.<\/p>\n\n\n\n Both food and oil prices tend to have fairly direct impacts on CPI inflation. Oil prices have also seen support from OPEC+.<\/p>\n\n\n\n OPEC+ has also been focusing on compliance with production cuts, which has added to price support.<\/p>\n\n\n\n To date, Brent crude oil has seen an average price of US$81.7\/bbl, which is near our forecast of around US$82\/bbl, and similar next year.<\/p>\n\n\n\n All of these factors are bad news for South Africa\u2019s economy and for consumers who want to see a continued decline in petrol and diesel prices.<\/p>\n\n\n\nPetrol price increases are bad for South Africa<\/strong><\/h2>\n\n\n\n
![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/07\/Annabel-Bishop-1024x576.jpg\")
<\/a>
\n\n\n\n