While another drop in fuel prices is on the cards next month, petrol and diesel is expected to rise on average this year. File picture: Gene J Puskar / AP Photo.
JOHANNESBURG - While another drop in fuel prices is on the cards next month, petrol and diesel is expected to rise on average this year, according to NKC economist Elize Kruger.

Commenting on mid-month fuel price data released by the Central Energy Fund, the Automobile Association of South Africa (AA) yesterday said that fuel prices were set for month-end decreases.

“The rand/US dollar exchange rate has had one of its flattest periods of trading in recent times. It has traded in a very narrow band between R12.30 and R12.40 to the US currency since the last week of December, bringing some welcome stability,” AA said.

The association said the international prices of petrol and diesel were also stable over the same period, although there was a slight climb in both in the second week of January.

“The current data predicts a decrease in petrol of nearly 41cents a litre, with diesel should be down by 23c and illuminating paraffin dropping 26c,” the AA said.

“Continued stability in fuel prices for 2018 will largely depend on political and economic factors which affect South Africa’s attractiveness as an investment destination,” the AA concludes.

But commenting on the fuel price outlook for the rest of the year, Kruger said, on average, fuel prices were expected to trend higher.

Increase

“At NKC we forecast an average rand/US dollar exchange rate of R12.94 to the dollar and average oil price of $63 (R778) a barrel in 2018, which will render an increase of 11.9percent in the rand price of oil in 2018 compared to 2017.

“We also expect that the fuel levy will again be utilised as a source of indirect tax in the (2018 financial year) national budget; thus also leading to higher fuel prices.

“However, in the short term we start the year with a drop in January 2018 and likely further fuel price declines in February, given the recent rand appreciation.

“And also, I do not believe that current levels of the international oil price, around $70 a barrel will be sustainable.

“Thus (as) always, fuel prices will not move in a straight line, but with a good dose of volatility,” said Kruger.

Independent economist Fanie Brink yesterday attributed the expected drop in fuel prices next month to a stronger performance of the rand in the past two weeks, despite the sharp rise in the Brent crude oil price, which is the international benchmark for oil prices.

Brink also said that according to the latest information by the Department of Energy, the prices of 93 octane petrol in Gauteng could next month decrease by 36.9c a litre.

On the other hand, the price of diesel with a 0.005 percent sulphur content could decrease by as much as 22.5c per litre, he said.

- BUSINESS REPORT