Ongoing declines in the price of oil since the second week of the year will give South African fuel users a breather for February. This is according to the Automobile Association (AA), which was commenting on unaudited month-end fuel price data released by the Central Energy Fund.
“Rising tensions between the USA and Iran in the opening days of 2020 sparked a sharp increase in international oil prices, but the commodity has rebounded quickly. In fact, the oil price has returned to a level we might have expected had the US-Iran flare-up not taken place at all,” the AA says.
Oil has dipped to its lowest level since the start of December. However, the Rand/US dollar exchange rate is steadily moving in the opposite direction, with the Rand having softened from its January 1 level of around R14.05 to the dollar to its current average of R14.30.
“We have some concerns over this ongoing weakening in the absence of any overt Rand shocks,” the AA says. “It is not a good sign of confidence in the SA economy.”
Despite the Rand’s trend, all fuel types are set for a decrease at month end. 95 Octane petrol will drop by around 13 cents a litre, with the other reductions marginal: 93 Octane petrol and both grades of diesel by four cents, and illuminating paraffin by three cents.
“We’re pleased fuel prices have managed to tread water at the start of a year, a year which is likely to again be extremely economically challenging,” the AA concludes.