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Weaker rand wipes out fuel price gains - AA

Oct 16 2017 12:51

Cape Town - The latest data by the Central Energy Fund continues to show how vulnerable South African fuel users are to political and economic sentiment which negatively affects the rand, the Automobile Association (AA) said on Monday.

The association was commenting on unaudited mid-month fuel price data released by the Central Energy Fund.

In its view, it is unfortunate that a weak rand against the dollar "neutralised" fuel price gains.

The AA explained in a statement that the landed price of petrol has dropped by almost 20 cents a litre since the start of October.

However, rand weakness against the dollar saw an impact of 22 cents a litre, leading to a petrol price increase of 2c a litre based on current data.

"Softer international petrol prices have been offset by a declining rand since the start of October, while diesel and illuminating paraffin prices were slightly up, leaving them with no protection against rand weakness.
 
"Including the effects of rand weakness, diesel is showing a potential price rise at the end of October of around 28c a litre, with illuminating paraffin set to increase by 20c," said the AA.

Further deterioration

It is not ruling out a further deterioration in the fuel price picture ahead of month end.

Last week Nick Downing of Overberg Asset Management told Fin24 that the recent weakening of the rand against the dollar was more likely a case of dollar strength than rand weakness.

In October a litre of 95 octane petrol increased to R14.01 inland and R13.52 at the coast. It was the first time since August 2014 that the inland price breached R14.00/litre.

The price of a litre of 93 octane petrol increased by 25c and a litre of 95 octane petrol went up by 29c in October. A litre of diesel currently costs R12.12 inland and R11.74 at the coast.

The price of illuminating paraffin rose by 39c/litre to R7.71 inland and R7.13 at the coast at the beginning of October. It followed increases of 19c and 67c a litre for all grades of petrol in August and September respectively. In July motorists paid 69c less on a litre of petrol.

By early afternoon trade on Monday the rand was up 0.33% against the dollar at 13.30.

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