Brace for further fuel price hikes

2016-06-21 06:00

ANOTHER fuel price increase has been predicted for the end of the month, with the AA warning that motorists may face even more increases this year.

The AA said that a rising world oil price, with limited support from the exchange rate, had set the stage for fuel price increases.

Commenting on unaudited mid-month data released by the Central Energy Fund, the AA said the data predicts a rise of up to 27c/litre for petrol and 61c/litre for diesel.

Illuminating paraffin is also under pressure, with the data currently showing a 60c/litre rise.

The AA said further economic shocks would weaken the exchange rate, and may lead to even higher fuel price increases by year-end.

The association said a recent stronger rand/dollar exchange rate had not been enough to counter the rise in world oil prices.

However, Momentum Life economist Johann van Tonder said he was “very uncertain” whether the fuel price would continue increasing until the end of the year. “At this point we do not know if there will be an increase or even a decrease in fuel prices toward the year-end,” he said.

Van Tonder said there were many factors that had to be taken into consideration, such as interest rate increases in the U.S.

“We need to also look at the oil reserves in the U.S. and if the stockpiles are being used or not. If the surplus declines, then that could put the brakes on an increase, but the U.S. could grow faster, which would increase the price of fuel. It is all very uncertain at the moment,” he said.

On June 1, the pump price for all grades of petrol went up by 52c/l and in May motorists had to fork out a whopping 88c and 86c more respectively for 95 ULP and LRP, and 93 ULP and LRP.

The price of petrol has already gone up by R1,52 since March this year.

Diesel reached R10,96/litre on June 1, according to figures from AA.

The price of diesel increased by R1,70 since March this year.

The main reasons are the continued upward march of international petroleum prices and the weakening rand/dollar exchange rate.

“Should the South African government not come up with a short-term plan to strengthen the rand and lower the political and economic risks, then we would probably experience further increases,” said Van Tonder.

With the cold of winter having set in, people who use paraffin for heating and cooking are poised to experience a sharp jump in their energy costs, aside from a rise in transport-related costs, the AA said.

It advised South African motorists to reconsider their driving patterns and car-sharing habits to economise, should the current run of fuel price hikes continue in the medium term.

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