Petrol price jump just adds to the woes of consumers
Expect R16 a litre from Friday, plus looming threats of higher interest rates from the Reserve Bank
The pressure on embattled consumers continues, with a massive fuel price increase expected to be announced on Friday due to a surge in the price of Brent crude oil and rand weakness.
This will in all likelihood push the cost of unleaded petrol towards R16 a litre. Expectations are for about a 70c to 85c increase in the fuel price to be announced on Friday, adding to the 72c levied at the beginning of May.
“The combination of a weaker exchange rate in May and higher global petroleum prices means that there is currently an 82c per litre under-recovery which is likely to translate into a similarly-sized petrol price increase early next month as well,” said Old Mutual Multi-Managers chief investment strategist Dave Mohr.
Petrol inflation was reported as 9% in April, and May’s number would be similar. June’s petrol inflation could therefore jump to 16%, said Mohr.The Automobile Association expects a tough time ahead for consumers, following a decision by the Reserve Bank last week to keep interest rates on hold. The bank went further, indicating that any move would in fact be upwards rather than a cut.
The AA’s Layton Beard said there would need to be a significant strengthening of the rand to alleviate pressure on consumers.
Although there were hefty fuel price increases recently, it was important to keep in mind there was a R1 drop in the fuel price in the first quarter of 2018, boosting consumer confidence and spending, said Econometrix director Azar Jammine.
Over the past two weeks Brent crude has come off a multi-year high of $80 a barrel to trade at about $75. The rand has meanwhile weakened 2% against the dollar in the year to date, but appreciated 5% compared to the end of April 2017.
Although there was market speculation Brent would slowly rise to $100 a barrel, this was unlikely to be sustainable, said Fred Fromm, vice president of Franklin Equity Group. Opec and Russian oil production increases, as well as surging US production, would offset losses from Iran and Venezuela.