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Massive fuel price increase expected in December

South African motorists should brace themselves for a massive fuel price increase in December, says Hanré Rossouw, portfolio manager at Investec, speaking to Talk Radio 702.

Rossouw said that an increase in the global oil price – to 2-year highs of $64 dollars per barrel – would compound pressures seen in the South African US dollar exchange rate, and push the price of petrol up by around 60 cents in December.

The global oil price spiked after the 32-year old crown prince of Saudi Arabia, Mohammed Bin Salman, arrested his political rivals on corruption charges. However, the $64 levels are a bit inflated, Rossouw said, and levels between $55 and $60 are more realistic.

South Africa has seen successive fuel price increases in the past four months, as the South African economy continued to struggle.

According to the Automobile Association, the situation will be exacerbated by ongoing political uncertainty in the country, with the ANC’s elective conference in December increasing the volatility of the local currency. Following a recent cabinet reshuffle by president Jacob Zuma, the rand weakened to over R14 to the dollar, which will have an impact on December’s fuel prices.

Another hike in December is likely to have a knock-on effect on inflation over the course of 2018, Rossouw said, but could provide an added impetus to an interest rate hike.

However, he warned that oil demand was still growing, with further increases also a likelihood next year.

South Africa also has to contend with the outcome of the ANC’s elective conference and ratings downgrades – which many analysts and economists view and inevitable – which will put added pressure on the economy and prices in 2018.

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