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Oil, Rand give fuel breather

Fuel prices are likely to drop again at the end of February. This is according to the unaudited mid-month fuel price data released by the Central Energy Fund.

International oil prices have been declining steeply since the start of February, and this factor has accounted for approximately half of the petrol price reduction and more than two-thirds of the diesel price reduction.

Over the same period, the Rand/US dollar exchange rate traded in a band around R12 to the dollar mark, giving some additional price relief for fuel users.

Current data suggest a petrol price decline of around 28 cents per litre, 36 cents for diesel, and 21 cents for illuminating paraffin.

The resignation of Jacob Zuma as president of South Africa caused some strengthening of the Rand, and we expect this to have an additional impact on the fuel price before month-end.

However, this does not mean the economy is out of the woods. The state is facing enormous losses due to tax under-collections, mismanagement at state-owned enterprises, and a rising debt burden.

The country is also on notice for a further credit rating downgrade, which might be triggered after next week’s Budget if the numbers come in behind expectations. We advise motorists to be extremely prudent and not bank on ongoing fuel price declines in the medium term.

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