SA petrol prices likely to go up next month

by Moyo Roy

2011 September 21 07:53:04 | 814 Views

The weakening of the rand/dollar exchange rate since the beginning of August is the main reason for South African petrol prices possibly rising around 23c/litre in October, News24 revealed on Tuesday.

Econometrix chief economist Tony Twine said that at the end of July the rand was R6.65/$, but had weakened to R7/$ by mid-August as the US and European sovereign debt crises shook global financial markets.

From mid-August the rand weakened further to between R7 and R7.35, and in the past couple of days has fallen as low as R7.73.

The average current underrecovery on the petrol prices is 23c/litre, according to information from the Energy Department.

This means that motorists are currently paying 23c too little for petrol, according to government's fuel price formula. The underrecovery on diesel is just under 20c/litre, and that for paraffin just over 12c.

In Cape Town 95 octane petrol is currently sold for R9.88/litre, and 93 octane in Gauteng for R10/litre.

At the beginning of September petrol prices were increased by 9c.

Wholesale diesel prices remained unchanged at R9.10 at the coast and R9.30 in Gauteng.

Twine believes the current $24 difference between the Brent crude price ($112/barrel) and the US price ($88) possibly arises from the impending conflicts in oil-producing countries such as Libya and Syria.

Other analysts have said that the US’s increasing conversion to natural gas resulting from the rising production of shale gas and low natural gas prices were exerting downward pressure on US oil prices.

Twine says West Texas Intermediate (WTI), the benchmark oil price in the US, is usually no more than $10 cheaper than Brent.

It's cheaper because it has a heavier and sourer (higher sulphur) content than Brent.

South African motorists unfortunately do not seem to derive any benefit from the cheaper US oil prices.

The refinery prices currently being used in the government's current fuel pricing formula are, according to Twine, determined mainly by oil prices in the Arabian Gulf, the Mediterranean Sea and Singapore. The only reasonlocal economists tend to watch the Brent oil price is because it is somewhat like that for Arab light crude, which determines refinery prices used in the South African pricing formula.

The WTI crude is moreover not exported, being used only in the US. America's main sources of crude include its own in the south and south-west, Alaska, and imports from Angola, Nigeria and elsewhere in West Africa and Venezuela, said Twine.

petrol

Source: News24