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Fuel price rise adds to downgrade woes

Economy

Cape Town – The hefty fuel hike of 50c a litre expected next Wednesday is the result of the weakening rand subsequent to the cabinet reshuffle and the consequent ratings downgrade.

This comes as the average daily petrol under-recovery for the period March 31 to April 25 was 49.221 c/l according to the Central Energy Fund. 

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 An under-recovery means that the basic petrol price based on the daily product price and exchange rate is more than the basic fuel price used in the calculation of the monthly retail petrol.  An under-recovery implies that the retail petrol price needs to be increased at the next monthly price adjustment, which is the first Wednesday of every month.

The increase in the retail petrol price is the result of both the weakening in the rand subsequent to the cabinet reshuffle and the consequent ratings downgrade. In addition there was a rise in the international oil price following an increase in geopolitical tensions regrading Syria and North Korea, according to independent agricultural economist Fanie Brink.

Read also: Downgrade will hit all citizens

As of April 25, the weakening of the rand contributed 28.834 c/l to the average under-recovery, while the rise in the international oil price contributed 22.834 c/l. The good news is that the rand’s recovery since almost touching R14/$1 in mid-April, as well as an easing in oil price, could result in a reversal of May’s fuel price in June as the April 25 basic fuel price of 567 c/l was similar to the basis fuel price of March.

BUSINESS REPORT ONLINE

 

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