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Stronger Rand offsetting oil price gains as February cut looms

30.01.2018

A stronger Rand in spite of skyrocketing international oil prices has been attributed to an expected cut in the price of fuel for February.

Commenting on unaudited released by the Central Energy Fund on Monday afternoon (29 January), the Automobile Association (AA) said it expects the price of petrol to drop by 32 cents a litre, diesel by 17 cents and illuminated paraffin by 20 cents, despite oil prices improving by as much as 36 cents in January.

"Fortunately for South Africans, the Rand / US dollar exchange rate has enjoyed a strengthening trend for almost as long, with the local currency accelerating its gains since the middle of January. It is important for political leaders to note the strengthening effect the recent more hands-on governance approach has had on our exchange rate, reducing many input costs for both businesses and private citizens, "the AA said in a statement.

The AA however warned that the proposed fuel price levy increase could have a further negative impact on cash strapped consumers, "as it is a concentrated tax with rapid effects on inflation and disposable incomes".

"Reviewing the fuel price history during 2017, the year saw some of the highest fuel prices in the country's history. If one graphs the exchange rate, it is inescapable that almost all sudden movements are associated with political events. We appeal to government to take a more judicious approach to policy and governance in future, as Rand weakness affects poorer people disproportionately," the AA said.

At the closing of business on Monday, the Rand was trading at R12.01 to the US Dollar with Brent Crude Oil at $69.16 a barrel.

Article written by Autodealer
30.01.2018
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