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SA motorists could be in for another rollercoaster year - AA

Jan 05 2017 12:33
Carin Smith

 Cape Town - South African motorists had a rollercoaster year in 2016 and a sharply lower rand in a strengthening oil price environment could make for eye-watering fuel prices, the Automobile Association (AA) said on Thursday.

South African motorists were already hit hard  at the start of the New Year with the latest petrol and diesel price hikes. The retail price of petrol (93 octane) increased by 50 cents per litre and that of 95 octane by 48c/l.

The wholesale price of diesel - 0.05% sulphur and 0.005% sulphur - went up by 39c/l and 39c/l respectively, while the wholesale price of illuminating paraffin increased by 43c/l.

The Department of Energy said the economic factors which impacted fuel prices include an increase in average international product prices of petrol, diesel and illuminating paraffin.

The AA considers the major domestic risk the perceived abuse of state institutions for personal gain by senior government figures.

Political scandals

"South Africa's faltering economic position means the country is ill-positioned to weather further political scandals. These would have a direct effect on investor confidence and drive the rand weaker," the AA said in a review of fuel price movements during 2016.

The petrol price increased in five of the 12 monthly fuel price adjustments in 2016, while diesel went up in six of them. Unleaded 95 petrol started 2016 costing R12.40/l and was up 45c/l at the end of the year. As for 500ppm diesel, it started 2016 at R10.81 and went up by 21c/l during the year.

The last price adjustment in December saw the year close out with petrol at R12.85 and diesel at R11.02. At its peak, petrol spiked to R13.34 during July. Diesel reached R11.70 in the same month. The AA explained this was due to all fuel types having been affected by negative sentiment following the UK's Brexit decision.

The biggest monthly increase for both petrol and diesel came in April, which yielded jumps of 88c and 95c respectively. This came as rising international oil prices gave South African consumers a battering, despite a firmer rand.

August saw the biggest single drop for petrol, as receding oil prices and a more favourable rand/dollar exchange rate knocked 99c off the price. Diesel saw a hefty price reduction of 74c in the same month, but its biggest monthly drop was a 76c decline in January.

READ: Massive petrol price hike for New Year

Trends for 2017

The AA however cautioned against using 2016 data to predict fuel price trends in 2017.

"While the supply-and-demand equation will certainly be more important in 2017 with the Organisation of Petroleum Exporting Countries (Opec) production cuts coming on stream, events affecting the rand's strength will determine how hard any oil price hikes bite," said the AA.

"The rand is exposed to numerous unpredictable risks. There is, for instance, a school of thought that a ratings downgrade was only staved off in December last year, rather than averted."

In the view of the AA, the international spotlight will be on the Trump presidency in the US and the UK's Brexit procedure.

"With South Africa having been named as one of the top global risks in 2017 by Time Magazine, the rand remains vulnerable to risk-averse investors who move capital to perceived safe havens," said the AA.

READ: SA one of top 10 risks to the world in 2017 - Time

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