How much the Nene fiasco affected a drop in the petrol price for S.Africans

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SA's petrol price to drop in September

Ongoing weakness in international petroleum prices has protected South Africans from the sagging exchange rate. This is based on the unaudited fuel price data released at month end by the Central Energy fund.

Owners of diesel vehicles will have something to smile about, with drops of between 73 and 75 cents a litre predicted for the new year. However, the petrol price is likely to show little change, perhaps a reduction of a cent or two. Illuminating paraffin is set to drop by 61 cents a litre.

Fuel prices would have dropped by up to an additional 27 cents a litre in January 2016 had it not been for substantial weakening of the rand/US dollar exchange rate. On December 1, the daily exchange rate used to calculate the fuel price was R14.40 to the dollar. By December 29, it had lost nearly a rand to R15.30.

By now the government cannot be unaware of the economic implications of removing stability from institutions such as the Treasury. Political figures should exercise caution before embarking on actions which may cause the exchange rate to deteriorate, increasing the cost of imported commodities such as fuel.

In reviewing the year as a whole, the AA has noted that the rand had lost about one-third of its value against the US dollar in 2015. On 29 December 2014, the rand was trading at R11.60 to the dollar. In the case of 93 unleaded petrol, weakening in the exchange rate contributed 45 cents a litre in price increases during 2015.

While the exchange rate had been trading in a fairly stable band during the last week of November and the first week of December, the decline resulting from the unexpected removal of South Africa’s Finance Minister, Nhlanhla Nene, had been steep, and a weakening trend had continued throughout the month. This indicates that South Africa’s economy is having difficulty winning back lost confidence, and our concern is that this trend may continue. If oil prices flatten out or increase in 2016, South African fuel users will be fully exposed to changes in the exchange rate.