‘Higher petrol prices are likely over longer term’

2013-08-07 00:00

TODAY’S 32c per litre increase in the price of petrol may be the last increase this year, but higher prices are likely over the longer term, Econometric chief economist Azzar Jamine said yesterday.

A modest strengthening of the rand/dollar exchange rate failed to offset the rise in international crude oil prices in July and the petrol price increased by 32c/l today, said a statement from the Department of Energy.

For SA’s increasingly cash-strapped consumers, the price increase is unwelcome.

WesBank calculations show the average monthly fuel expense for consumers has risen to R2 275 in 2013 (excluding the latest increase) from R1 421 in 2010, a rise of 60%.

The price of diesel increased by 32,96c/l today.

The Brent crude oil price, the key indicator of the major input into the local price of petrol, increased to about $108 (R1 070) per barrel from $102 per barrel in July after political instability in oil-producing regions hurt the price.

There was unrest in Egypt, Sudan and Libya, collapsed oil production in Syria, pipeline sabotage and theft affected Nigeria’s output, while attacks on Yemeni’s main oil pipeline disrupted production from that country. Global demand for oil rose due to strong positive economic data from the U.S. and China.

Jamine said the crude oil price had been exceptionally volatile in recent years, making forecasts difficult. For instance, the price slipped to below $10 a barrel in 1999 and peaked at $147 per barrel in 2008.

It fell to around $35 a barrel in 2009.

“The long and the short of it is that it is 10 times as high as it was a decade ago and 30% off its peak,” said Jamine.

He said while the overall trend was upward over the long term, there was a possibility that rand currency movements may provide some relief in local petrol prices in the remaining months of this year.

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