Tawanda Karombo Harare
MANUFACTURING and industrial companies in the southern African region are set to benefit from lower energy prices due to the fall in international oil prices.
Experts said the lower fuel price would help cut production costs.
In South Africa, experts said it was unlikely that the SA Reserve Bank would institute another rate hike “while the oil price is declining as there is less pressure on supply-driven inflation”.
Brent crude prices had fallen to $65.30 (R755) a barrel by afternoon trade yesterday, a decline of 43 percent since June 19, when oil prices reached $115.17 a barrel.
Analysts said the continued fall in the oil price, which could fall as low as $50 a barrel, was being fuelled by reduced economic growth in most global markets, as well as a slowdown in China, the world’s second-largest economy.
For the southern Africa region, the fall in international oil prices has already resulted in a fall in petrol prices.
“Lower oil prices mean that we import oil at a lower price. Inflationary pressure will be lowered and this will have an impact on the rate-hiking cycle of the Reserve Bank. It is unlikely that we will see another rate hike while the oil price is declining as there is less pressure on supply-driven inflation and the currency,” said Craig Parker, a senior economic consultant at Frost & Sullivan.
Experts said the decrease in fuel prices would cut “the household expenditure burden” substantially.
Petrol prices in regional countries such as Zimbabwe have already fallen to about $1.52 a litre after peaking at $1.57 a litre.
However, the energy regulator in Zimbabwe has refused to force petroleum dealers to further reduce the price in line with developments in other regional countries such as South Africa and Botswana, saying prices vary from country to country.
“Prices in different countries are affected by different factors and some of (these) are: government policy on fuel taxes; fuel supply chain structure; fuel stabilisation mechanisms, whether landlocked or not (transportation); subsidies and (the) exchange rate against the US dollar,” said Gloria Magombo, a Zimbabwe Energy Regulatory Authority chief.
Analysts at Deutsche Bank cut the bank’s outlook for Brent crude oil, saying “with Opec having decided to allow price to ration supply, as we peer into 2015, the outlook for crude markets is challenging”.
Francisco Blanch, the Bank of America commodity chief, said “the consequences (would be) profound and long-lasting”.