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Fuel to climb as oil outmuscles Rand

Global oil prices strode higher during July, setting the stage for fuel price increases in August despite a surprise upside from the Rand. This is according to the Automobile Association which was commenting on unaudited month-end fuel price data released by the Central Energy Fund.

As matters currently stand, petrol is likely to increase by between nine and 16 cents a litre, diesel by up to 48 cents, and illuminating paraffin by 43 cents.

“Oil traded in a fairly tight range throughout July, but it was a substantial climb at the beginning of the month, plus some recent volatility, that combined to push prices higher,” the AA says. It notes that diesel and illuminating paraffin have been more affected by these swings than petrol.

The Association says that the steady strengthening of the Rand during July appears to confirm the view of some economists that the currency is undervalued.

“The Rand gained eight cents against the US dollar during July and the average exchange rate has firmed to below R16,90.With so much negative news surrounding the economy, the Rand’s firmer trend is welcome, but we would like to see the government support this trend in the area of economic policy certainty,” The AA says.

The Association says without the Rand’s good performance this month, the increases would have been higher, and they are solely attributable to increasing oil strength.

“With the level of global economic turmoil that currently prevails, predicting a ‘normal’ band for oil is near-impossible; we advise motorists to be pragmatic about the possibility of further increases, and to plan their budgets accordingly,” the AA concludes.

Source: The Automobile Association of South Africa

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