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Expect another big petrol price increase in December

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Petrol - [https://businesstech.co.za/news/wp-content/uploads/2015/01/Petrol-half.png] Petrol - [https://businesstech.co.za/news/wp-content/uploads/2015/01/Petrol-half.png]

While the price of diesel will increase by between 23 and 27 cents a litre, and petrol by four cents in November, motorists should brace themselves for a substantial fuel hike in December.

Largely the result of a rapidly depreciating rand and rising crude oil prices, consumers could expect to pay anywhere between 30 to 40 cents a litre more for petrol and diesel in December, said independent economist, Dawie Roodt.

“The political and economic instability in South Africa is going to keep our currency volatile and I believe that further increases in the crude oil price are likely. All of these factors are conspiring against the fuel price and a substantial increase is highly likely,” he said.

The Automobile Association also warned that fuel price hikes are inevitable before year end. “We believe fuel prices have not yet felt the full effect of the rand’s weakening in the wake of the medium-term budget policy statement. We expect that impact to start with next month’s fuel calculations, meaning South Africans should prepare for further price hikes before Christmas,” it said.

Weak rand

According to the department of energy, November’s fuel price hikes were largely due to the weakening of the rand, which was captured at R13.62 to the dollar in October compared to R13.13 during September.

The rand has weakened further since then.

Following a bleak mini-budget report by finance minister Malusi Gigaba last week, the rand reached its weakest point in 2017 at R14.24 to the US dollar.

By 11h00 on Monday the currency had strengthened slightly to R14.11 – but analysts and economists are not optimistic that the scenario will improve much in the coming weeks.

Because of South Africa’s low growth, widening debt, high levels of unemployment, SOEs in decline, and a major R207 billion tax shortfall expected over the next three years, a rating downgrade to full junk is practically inevitable, economists have said.

This would push the country out of the World Government Bond Index, wiping as much as R200 billion from the economy, and knocking the rand even harder.

Neil Roets, CEO of Debt Rescue, said it was also likely that the ratings agencies would announce downgrades to South Africa’s sovereign debt to junk status before the end of the year – which would further impact on the rand, and put more pressure on consumers this Christmas.

Further, political instability has also put the rand in a volatile position, with markets watching keenly to see who will emerge as the ANC’s next leader at the party’s elective conference in December – but more so on the machinations driving the political sphere ahead of the conference.

“Consumers should brace themselves for hard times ahead and face the fact that all of us are now going to be held collectively responsible for our government’s inability to grow the economy and create prosperity for all South Africa’s people,” Roets said.

He said the continuous increase in the diesel price was especially bad news because virtually all consumer goods were transported by road and would result in higher prices across the board.

 


 

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