Mixed outlook on fuel price as oil prices spike, rand gains

An appreciating rand and a spike in international oil prices has left a mixed fuel price outlook, according to the latest fuel outlook data for the end of November.

According to the Automobile Association (AA), rand appreciation was being countered by a sharp spike in international oil prices. This was in response to unaudited mid-month fuel price data released by the Central Energy Fund.

“It is quite unusual to have such a spread of price outlooks as is currently the case,” the AA said, noting that petrol was set to drop by up to 36 cents a litre, but by contrast, diesel would likely only see a four-cent drop. Meanwhile, illuminating paraffin was showing an increase of almost 10 cents a litre.

The association said the recent spike in the international prices of refined fuels ended a month-long price decline. Earlier in November, the international price of diesel shot up by nearly 20% between 2 November and 11 November before pulling back slightly, while petrol went up more than 15%.

“Fortunately, the rand has fended off most of these increases, and has appreciated strongly against the US dollar, dipping below R15.50 to the dollar on November 10.”

In the beginning of the month, the petrol price dropped to 27 cents a litre. Minerals Resources Minister Gwede Mantashe at the time said the strengthening of the rand against the dollar led to lower contributions to the basic fuel prices of petrol and diesel.

According to the AA, currency and oil price fluctuations were due to a rebound in world consumption, which was occurring faster than production.The “background noise” around the US election of Joe Biden as US president also contributed to this. Optimism in the wake of the announcement of a Covid-19 vaccine was being countered by jitters over renewed lockdowns in Europe and the rapid spread of Covid-19 in the US, AA said.

“Under the circumstances, oil prices and the rand/USD exchange rate remain as stable as can be expected, the association said.

“With the South African economy in its current fragile state, fuel users will be among the first to feel any economic shocks.”

Compiled by Simnikiwe Hlatshaneni

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