Fuel price puzzle

Cape Town - Whether petrol prices will be raised or lowered in November is in the balance, against the background of the volatile rand/dollar exchange rate and the rising oil price.

On Friday the oil price stood at $77/barrel, having risen 11% since October 7, the day on which South African fuel prices were last adjusted.

Analysts find the higher prices strange because large quantities of mid-distillate fuels (such as diesel and heating oil) are still being stockpiled in the US and other countries, while demand is down as a result of the recession.

According to Econometrix economist Tony Twine, the latest figures from the Department of Energy point to a price cut of 17c/litre for petrol next month, 7c for diesel and 1c for paraffin. But with the oil price edging upwards this could swing around into a hike, especially in the case of diesel and paraffin.

Certain US refineries have, according to reports from Bloomberg, begun to close down some of their plants because they reckon they have sufficient stock for Americans in the northern hemisphere winter, when consumption of heating oil and diesel increases.

Since October 2 there has been an average over-recovery of 28c/litre on 95 octane petrol. But the day-to-day over-recovery has been shrinking to 5c since October 7, when the petrol over-recovery was 50c/litre. The over-recovery on diesel was 42c/litre on October 7 and it has since turned into an under-recovery of 7.2c.

Twine said market fundamentals indicate that oil prices should be lower. He suspected speculative activity might have led to the increase.

- Sake24.com

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