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Political woes put brakes on fuel price drop


Renewed oil price strength, and a turnaround in the Rand/US dollar exchange rate, have put the brakes on the substantial drops in fuel prices 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 (CEF).

"International petroleum prices have put in a surprising rally since the middle of the month," the AA said. It noted that a stronger Rand would have cushioned this increase in international petroleum prices but that this is now not the case given the latest developments related to the weakening Rand.

In mid-August, when the Rand was at stronger levels, the AA predicted that petrol would drop by up to 69 cents a litre, diesel by 94 cents a litre, and illuminating paraffin by around 92 cents a litre. The Association said it now expected petrol to fall by around 25 cents a litre, diesel by 54 cents, and illuminating paraffin also by 54 cents.

"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.

The Association further noted that while the impact on fuel prices of the significant devaluation of the Rand against the US dollar would not be felt immediately, the effects of the weaker Rand on fuel prices would be noticeable towards the middle and end of September, if it does not strengthen before then.


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