Ethel Hazelhurst
Motorists could be paying R10.50 a litre for 95 octane unleaded petrol in Gauteng from Wednesday next week.
The sharp drop in the rand in recent weeks has widened the gap between the R10.18 a litre that consumers are paying at the pump and the prices of a basket of global benchmark petroleum products.
The average daily underrecovery has been climbing steadily and yesterday it was running at nearly 32c a litre.
The price increase, which will be announced by the Department of Energy on Friday, will depend on shifts in global crude oil prices and the rand’s exchange rate over the next few days.
It will be the third consecutive month in which the price has been hiked, contributing to the squeeze on consumers.
Second-round effects on households are expected as well, because rising transport costs are passed on by businesses to consumers.
The petrol price peaked at R10.70 in July 2008, when Brent crude rose to a record $147 a barrel and the dollar was worth about R7.50. Year-on-year inflation peaked the following month at 13.7 percent.
The petrol price declined to R6.01 in January 2009, despite the fact that the rand had weakened to R9 to the dollar, after Brent crude tumbled to $36 a barrel.
Inflation fell steadily thereafter, but a reweighting of the consumer basket that year means the inflation figures were not directly comparable.
This month, both the rand and crude oil prices have been weakening in the face of a stronger dollar.
The local currency dramatically lost value as the dollar exchange rate moved from R7 at the start of the month to a worst closing level of nearly R8.50 on September 22. At 5pm yesterday, the currency was bid at R8.0776 to the greenback.
But the impact has been partially offset by weaker oil prices – particularly over the past few days. Brent crude oil, which traded at more than $115 a barrel at the start of the month, dropped to $107 on Friday.
Yesterday it tumbled “below $102 to a near seven-week low”, Reuters reported, before regaining some lost ground later in the day.
Fears of falling oil demand globally were responsible for the sharp oil price decline, after poor economic data came from the US and Europe in recent weeks.
Perceptions that the global recovery has stalled have been compounded by the inability of euro zone leaders to agree on a way to solve the sovereign debt crisis in the region.
Progress on that front could see oil prices increase again, but it would prompt a recovery in emerging market currencies, including the rand.