South Africa Hit by Record Fuel Increase

The Department of Energy in South Africa has announced a massive petrol price increase for October.

The price of 93 octane fuel will go up by 99 cents per litre, while 95 octane will be R1 more at the pumps. Diesel will go up by R1.24 per litre, the department said.

This puts the price of petrol over or close to R17 a litre – the highest recorded point of all time.

Illuminating paraffin will increase by R1.39 per litre (R1.04 wholesale), while LP gas will increase by R1.79 per kilogram.

According to the department, the price increases are due to the average international product prices of petrol, diesel and illuminating paraffin increasing during the period under review, as well as exchange rate pressures.

The rand depreciated against the US dollar during the period under review, on average, when compared to the previous period. The average rand/US dollar exchange rate for the period 31 August 2018 to 27 September 2018 was R14.7899 compared to R13.9430 during the previous period.

This led to a higher contribution to the basic fuel prices on petrol, diesel and illuminating paraffin by 48.72c/l, 51.03c/l and 50.62 c/l respectively.

The steep increase in petrol will hurt consumers in the pockets, but was not unexpected, with many analysts saying that the October hike would be unprecedented and “monstrous”, following the short-lived government intervention in September.

The rand has however, shown remarkable resilience in recent sessions, according to Andre Botha, a senior dealer at TreasuryONE. Having tested R15.70, it closed the month at R14.10, he said.

“After the positive turn, the rand had in September this month brings its own market moving events, and within a South African sense, it will be the Mid-Term Budget Speech which has a potential two-way risk for the rand,” said Botha.

“We expect a slight bias for the rand to move lower with the R14.10 proving stick and only significant break of this level will open up the door for significant gains.”

Momentum noted in a monthly market snapshot report that the rand was the third best performing currency against the dollar in September, behind the Turkish lira, and Chilean peso.

The rand gained 3.8% against the dollar and the euro, and appreciated 3.1% against the pund, Momentum said.

However, the outlook for petrol is less rosy, as Bloomberg reported that the prospect of $100-a-barrel crude is once again on the table as members of the Organisation of Petroleum Exporting Countries show little willingness to fill the supply gap left by US sanctions on Iranian oil.

Brent Crude traded above the $80 mark.

(Credit: Business Tech)

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