Fuel set to jump as oil recovers – AA

Oil is continuing its march back towards its previous levels in the first half of June, setting the scene for further hefty fuel price hikes going into July. This is the view from the Automobile Association, in its commentary on unaudited mid-month fuel price data released by the Central Energy Fund.

Based on current figures, petrol is set to climb by up to R1.59 a litre, diesel by R1.48, and illuminating paraffin by a massive R1.94.

“The basic fuel price used in South Africa has jumped by eight percent since 1 June, with higher peaks, as international oil prices claw back some of the massive declines of the past four months,” the AA says.

“With world demand expected to continue to increase, South Africans must likewise expect the fuel price to gradually edge back towards pre-COVID-19 levels.”

However, the Association points out that it will probably take some months for oil to return to its previous trendline, giving motorists something of a breather.

“South Africans are also benefiting from increasing Rand strength, with the local currency having made up 60c against the US dollar since the start of June, and briefly breaching the psychological R17 to the dollar mark. In fact, the Rand’s firmer performance in June has offset the fuel price increases by around 36 cents a litre to date,” the AA notes.

The AA, however, notes that the currency is far weaker than before, and continuing relative weakness would place South African fuel users at an increasing disadvantage as oil prices rise.

“Some pragmatism is needed, of course: with fuel showing this kind of increase in just the first two weeks of June, the increase could be much heftier come month end. If this continues, it might not be long before the R4-a-litre saving motorists enjoyed between February and April is erased. So, despite our optimism over a slow rebound for oil, we advise caution, especially with the Rand currently trading around R3 higher to the dollar than before the COVID-19 crisis began,” the Association concludes.