Fuelling inflating

2008-07-04 00:00

This week South Africans suffered what has become a regular monthly shock to their pockets. The latest rise in the price of petrol was particularly severe, promising further inflation and interest rate hikes. It also threatens the government’s macro-economic policy, the trade balance and the rand exchange rate.

Major reserves are located in politically unstable regions. Production in Nigeria and Iraq is currently depressed and there are serious concerns about Israel’s intentions towards Iran. Oil is traded well in advance of production, so the price is adversely affected by political uncertainty. Currently it is also being used as a hedge against dollar weakness.

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