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More petrol, rate hikes on cards

Cape Town – With the petrol price set to increase by 39 cents per litre and diesel by 24c per litre at midnight on Tuesday – the highest level ever in South Africa - economists are already predicting even more increases in March.

At the current rand/dollar exchange rate a further petrol price hike of around 20 cents a litre can be expected, according to economist Dawie Roodt.

“Fortunately, the international oil price has been marginally lower in recent weeks. Unless the rand depreciates further, this should be the last major increase in the petrol price,” he told Fin24.

“I do, however, expect the rand to remain quite volatile in coming months, which may result in further increases, but the worst is probably behind us.”

By year end he expects the rand to regain some lost ground, which will lead to a lower petrol price.

“These price increases are having a devastating effect on the consumer,” said Roodt.

“We have had e-tolls, interest rate increases, electricity prices will go up again and food prices are also likely to accelerate later this year.”

Economist Mike Schussler told Fin24 that the petrol price problem this time round was simply due to the rand.

“Obviously next month the rand will also be the major player. The rand is even more volatile, so next month it is likely that we will get another increase in the price of petrol,” said Schussler.

“In April a petrol price increase is also very likely, because the actual taxes usually go up with the national budget. There is usually about a 20c increase either in the road tax or road accident fund contribution.”

On a positive note, Schussler said SA might get lucky with the oil price during the year if Iran gets back to supplying oil in terms of a political agreement.

The problem of the rand would still remain though. He pointed out that for the last three months the petrol price increases were in large part due to the rand.

“It is very likely that petrol will become a greater driver of inflation. So these petrol price increases will play a major role in the actual inflation rate this year,” he said.

“That is why I think (Reserve Bank governor) Gill Marcus would have to raise interest rates again in March.”

If the rand's depreciation continues unchecked, a petrol price of R16 per litre is possible in the medium term, the Automobile Association said on Monday.

"On December 27, a dollar cost R10.35. By January 27 it cost R11.20.

"Meanwhile, international petroleum prices have ticked up slightly since our last review of fuel price trends in mid-January, so it's a double whammy for motorists," the AA said in a statement.

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