Massive fuel price drop predicted in January - but rand could be the jinx

Substantial further fuel price reductions are on the cards for January, but the exchange rate could spoil the party, the Automobile Association (AA) said in a statement on Friday.

It was commenting on the unaudited mid-December fuel price data released by the Central Energy Fund (CEF).

The AA predicts that petrol could drop by R1.19 per litre, diesel by R1.44 per litre and illuminating paraffin by R1.32.

It said that the expected decreases were attributable to continued downward movement in international product prices.

Up to 95% of the expected drop in fuel prices in January can – at this stage – be ascribed to these lower product prices, with the rand/$ exchange rate contributing only 5% of the forecast decrease, according to the AA.

"The SA fuel price has yet to fully catch up with considerably lower international petroleum prices, which have stayed at the plateau they reached at the beginning of December," the association commented.
 
"However, a sharp depreciation of the rand versus the US dollar has been noticeable since December 4, and we will be monitoring this trend closely for the remainder of the month."

The rand, which bottomed out at R13.70/$ in the first week of December, took a sharp turn for the worse, reaching nearly R14.50/$ by December 11 before staging a slight recovery, the AA explained.

"This hefty swing could offset oil price gains quite markedly if it continues," according to the association.

In the view of the AA, much will depend on political and economic stability during the remainder of December, both at home and abroad.
 
"The local economic outlook remains sluggish, while international trade considerations and political instability in oil-producing regions could conspire to push international oil prices back up," said the AA.

"Despite this, we are hoping these factors are not enough to deny South African fuel users another much-needed breather at the pumps at the start of the new year."

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