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Fuel breather for motorists as oil sinks, rand firms - AA

Feb 24 2017 10:30

Cape Town - Rand strength, and a retreat of international petroleum prices, have combined to produce a surprise drop in fuel prices at the end of February.

This is according to the Automobile Association (AA), which was commenting on unaudited month-end fuel price data released by the Central Energy Fund.

"After a bit of a stutter at the beginning of February, the rand has continued to firm against the US dollar throughout the month.

"At the same time, international oil prices have come off their mid-month highs and are now testing their lowest levels yet for 2017," the AA said in a statement.

By 10:15 the rand was trading at R12.88/$, and 18-month high, while oil was selling for $56.36 a barrel.

The association said it hoped the oil price trend was a sign that the Opec production cuts announced in 2016 were beginning to be more comprehensively priced into the market, bringing more stability to the fuel price picture.

The AA expects petrol to drop by around seven cents a litre, diesel by about 2c/litre and illuminating paraffin by 8c/litre.

"If the rand's strengthening trend is prolonged and oil prices remain around their current levels, it's possible that some of the recent fuel price increases may be reversed in the medium term."

However, the AA warned that the rise in fuel taxes would see the fuel price picture at the end of March begin with a deficit of 39c. This is a combination of an increase of 30c to the general fuel levy, and an increase of 9c to the Road Accident Fund levy. The increases come into effect on April 1.

"It would take quite a substantial effort from both the rand and oil prices to offset the tax hikes and prevent higher fuel prices in April," the AA said.

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