Cheaper petrol on cards for motorists | Fin24
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Cheaper petrol on cards for motorists

Jan 29 2018 19:19

Cape Town - Motorists can look forward to cheaper fuel prices in February, thanks to a rampant rand, the Automobile Association said on  Monday.

International fuel prices shot up by as much as 36 cents a litre in January, but were outshone by one of the strongest rand performances in many months, according to the AA.

Commenting on unaudited month-end fuel price data released by the Central Energy Fund, the AA said it expects the price of petrol and diesel to drop by 32c and 17c a litre respectively at month-end. Illuminating paraffin is expected to be 20c cheaper.

The rand was still trading at its lowest levels since mid-2015 on  Monday and by 17:56 the local unit was trading at R11.98 top the greenback. The election of Cyril Ramaphosa as leader of the ruling ANC, together with global risk-on sentiment and a weaker dollar fuelled the rand's rally to under R12/$ last week.

“Three months ago we were staring down the barrel of total junk status,” Warrick Butler, the head of emerging market spot trading at Standard Bank Group told Blomberg News. “Today the mood has rotated 180 degrees.”

Reviewing the fuel price history during 2017, the AA says the year saw some of the highest fuel prices in the country's history.

If one should graph the exchange rate, it is "inescapable that almost all sudden movements are associated with political events".

The AA therefore urged government to take a "more judicious approach to policy and governance" as rand weakness "affects poorer people disproportionately".

It highlighted the axing of former finance minister Pravin Gordhan and the sovereign credit rating downgrades as notable events affecting the rand and subsequent fuel prices negatively.

December 2017 saw the petrol price reach an all-time record high of R14.76 a litre.

"The downgrade and subsequent fuel price peaks reversed a declining fuel price trend and caused sustained high fuel prices in a low-growth environment. Businesses, already under margin pressures, had little option but to pass on their increased fuel costs to consumers," the AA said.

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