Cheap oil shielding SA from rand's fall

South African motorists insulated from the effect of sagging exchange rate by continued weaker global fuel prices.

Johannesburg - South African motorists are being insulated from the effect of the sagging exchange rate by continued weakness in international fuel prices.

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Motorists paying for weak rand

In its comments, published on Wednesday, on unaudited fuel price data released by the Central Energy Fund, the Automobile Association said: "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, while illuminating paraffin is set to drop by 61 cents a litre."

Fuel prices would have dropped by another 27 cents a litre in January 2016 had it not been for the drop in the rand/dollar exchange rate.

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The AA explained: “On 1 December the exchange rate used to calculate the fuel price was R14.40 to the dollar. By December 29, it had lost nearly R1 to R15.30.

The rand lost about a third of its value against the US dollar in 2015, the association added, pushing up the price of 93 octane petrol by an extra 45 cents a litre. The steepest decline came immediately after the unexpected removal of finance minister Nhlanhla Nene, and that weakening trend continued after the recall of former finance minister Pravin Gordhan.

"This indicates that South Africa's economy is having difficulty winning back lost confidence," concluded the AA. "If oil prices increase in 2016, South African fuel users will be very vulnerable to changes in the exchange rate."

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