AA predicts sharp drop in fuel prices
The Automobile Association (AA) says South African motorists could see a massive reduction in fuel prices in April thanks to the drop in the international oil price.
The AA released its mid-month prediction on Friday on the back of a huge drop in the international oil price over the past week.
Crude markets were plunged into turmoil Monday after top exporter Saudi Arabia sparked a price war with Russia over a row about slashing output to support the virus-battered energy sector.
Oil prices swung more than six percent Friday, but were still on track for their biggest weekly loss in more than a decade owing to a price war and the spreading coronavirus pandemic.
The AA says even though the rand lost ground against the US dollar, it paled into insignificance when compared to the drop in the oil price.
“The current data shows petrol down by up to R1.11 a litre, diesel by R1.10 and illuminating paraffin by R1.18,” says the AA’s Layton Beard.
“However, these declines must be weighed against the 25 cent increases to the fuel levies announced by the finance minister in February and which come into effect in April.”
Beard says the panic in the global financial markets due to coronavirus could weaken the rand further.
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The mining sector is among those that recorded that biggest losses. Naspers, which owns the largest chunk of stocks in South Africa, fell 7.1%. Jammine adds that the additional Covid-19 cases also added salt to injury. SA is sitting on a total of 17 confirmed cases.
"As the spread of the COVID-19 virus accelerates across the globe, world financial markets have plunged, with capital fleeing to safe-haven assets. The rand has been sharply weaker against the dollar on this trend.”
Beard says the last time oil prices dropped so sharply was during the first Gulf War almost 30 years ago.
He adds that the uncertainty over the coronavirus pandemic could possible see an extended period of disorder.
"It will take quite some time for the global economy to get back on an even keel after the current ongoing events, and the next two or three months seem set to provide some fuel price relief to hard-pressed motorists.”