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Economist warns of steep petrol hike

Mar 28 2011 11:48 I-Net Bridge

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Johannesburg - Petrol may rise by as much as 52 cents per litre next month, according to Tony Twine, an economist at Econometrix.

Twine said tariff increases would make the hike steeper.

"We're looking at a 28c per litre increase in the petrol price, 18c for fiscal revenue and the Road Accident Fund and a further 6c, which is the National Energy Regulator of SA's pipeline tariff. This all adds up to 52c per litre for petrol," he said.

Twine said the last time there had been an increase of a similar magnitude had been in 2008, when the crude oil price was shooting upwards.

"I think we hit a single month price adjustment of 60c per litre of petrol," he said.

Apart from the taxes, which were about 40% of SA's April petrol price increase, Twine said the main driver was the price of crude oil.
 
"Crude is in everything you can see or touch around you - it's not only in refined fuel but is also present in solvents such as washing powder and paint, fertiliser and carbon black for making artificial rubber. Crude is also contained in bitumen, so the roads on which you drive also have an oil price component."
 
Referring to the turmoil in the Middle East and north Africa (Mena) region, Twine added that there seemed to be a flat spot in terms of the Arab world's oil prices and the political risks that had underpinned a rise in those prices.

"Brent crude has been trading in a narrow range of $108-$118 per barrel at the top and bottom during the month of March.

"Certainly at each end of that range there's been quite strong resistance to the price breaking out - so I think the range will hold for as long as we don't get any decisive moves."

As a result, over the past few days crude oil had been priced between $113 - $115 a barrel.

"It looks likely this will hold for some time - unless there is a political deterioration in an oil producing state such as Saudi Arabia or Iran."

Twine said that, should this occur, the sky would then be the limit for the price of crude oil.

He said that  if peace broke out in Libya and in any of the other smaller producers, it was possible that the price of crude would decrease to about $100  per barrel in the short term.

"As the northern hemisphere moves into the warmer summer months, we could see crude coming down even further to $90 a barrel or even less."

He said a stronger rand had cushioned some of the oil price surge.

"As the rand has strengthened, it has partly offset higher crude prices, however if these prices suddenly balloon because of some event in the Mena region then we really can't expect the rand to completely cushion the upside of the dollar price of crude."

nersa  |  raf  |  petrol  |  fuel levy  |  oil
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