Motorists and industry should brace themselves for record high fuel prices over the next couple of months unless the rand recovers meaningfully from its current freefall.
As a result of the rand's disastrous September against the US dollar, which has seen it shed more than 15% from around 7.00 to around 8.20, under recovery in the fuel price mix will see petrol and diesel rise sharply on October 5.
According to economic think-tank Econometrix, petrol is likely to rise by 36c a litre on October 5, while diesel is expected to rise by 38c a litre. In Gauteng, petrol is likely to go up to R10.36 a litre, just shy of its all-time high price of R10.50 a litre.
The current price fixing period began on September 2 and ends on Thursday 29. By yesterday, the average under recovery for the period was 28c a litre on petrol, but yesterday's under recovery was 55c a litre. A week ago the under recovery was around 23c a litre, but this was when the rand was at 7.30 to the dollar.
"If oil stays at around current levels of $110 a barrel and the rand does not recover, we are likely to see another big rise in fuel prices in November," said Econometrix's Tony Twine.
At the current levels of the oil price and the rand, petrol and diesel would both rise by more than 20c in November. This would see petrol at around R10.60 a litre.
However, Twine believes that the rand could stabilise or strengthen a bit after its sudden and precipitous fall, which was exacerbated by importers making final orders for the upcoming Christmas period.
Adding further grist to the inflationary mill, said Twine, is the fact that fuel retailers were still awaiting approval of a margin increase from the National Energy Regulator of South Africa (Nersa) which would add a further dimension to rising fuel prices.
"The Fuel Retailers Association has been looking for a margin increase of around 15c a litre. This increase did not occur in August or September, so it still has to be implemented once it has been approved by Nersa," said Twine.
If a 15c a litre margin increase is granted, petrol and diesel could both be close to R11.00 a litre before the end of the year, unless a lower oil price and a stronger rand come to the rescue.
Earlier this year, Twine delivered a presentation that outlined how pervasive crude oil's impact is throughout the South African economy.
Apart from increasing travel costs for motorists and the movement of goods and services around the country, high oil prices negatively affect the input costs of a wide range of goods with prices rises ultimately filtering through to consumers.
Source: Business Live
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