Gordhan jitters, oil strength slam brakes on fuel price drop

Cape Town - Renewed oil price strength and a turnaround in the rand/US dollar exchange rate have put the brakes on the substantial fuel price drops suggested by mid-August data.

This is according to the Automobile Association (AA), which was commenting on unaudited end-August fuel price data released by the Central Energy Fund.

The AA said in a statement on Tuesday that a stronger rand would have cushioned the increase in international petroleum prices, but this possibility has now dissipated with the ongoing political turmoil surrounding Finance Minister Pravin Gordhan.

READ: Rand may slump by 30% as Treasury battle heats up

The AA predicted on August 15 that the petrol price would continue its downward trend, with an estimated drop of 69 cents a litre based on the rand's strength. Diesel was predicted to decrease by 94c/l and illuminating paraffin by about 92c/l.

However, with the rand reacting negatively to the Hawks' circling of Gordhan over his involvement in the so-called rogue unit at the South African Revenue Service during his time as commissioner, the AA now sees the pump price of petrol only dropping by 25c/l. Diesel and illuminating paraffin are now both expected to cost only 54c/l less.

READ: Gordhan probe poses significant downgrade risk - economists

"The stronger oil price might have been kept in check more effectively had the rand not sagged so sharply against the dollar in the wake of developments around the Minister of Finance, Pravin Gordhan, being the subject of further investigation by the Hawks," the AA said.

READ: Brilliant analysis: #GordhanGate – The Good, the Bad and the Ugly

International petroleum prices have put in a surprising rally since the middle of the month, the AA said.

The AA warned that should the rand not strengthen again, impact of the significant devaluation of the rand against the US dollar would become more apparent towards mid- and end-September.

NOW READ:

Gloves off as Treasury takes swipe at Eskom

Mailbox: Guardian, Raider of Treasury square off – only one will survive

Guptas’ selloff may signal Zuma’s waning control

Read Fin24's top stories trending on Twitter:

ZAR/USD
17.00
(-0.09)
ZAR/GBP
21.24
(-0.12)
ZAR/EUR
19.14
(-0.13)
ZAR/AUD
11.81
(-0.13)
ZAR/JPY
0.16
(-0.20)
Gold
1774.74
(+0.03)
Silver
18.05
(+0.01)
Platinum
808.00
(+0.25)
Brent Crude
42.78
(-0.79)
Palladium
1914.01
(+0.62)
All Share
54521.90
(-0.17)
Top 40
50179.89
(-0.26)
Financial 15
10150.02
(-0.64)
Industrial 25
76554.73
(+0.52)
Resource 10
50138.02
(-1.24)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1592 votes
I am taking a hit, but should be able to recover in the next year
23% - 2085 votes
My finances have been devastated
35% - 3134 votes
It's still too early to know what the full effect will be
25% - 2257 votes
Vote