The Automobile Association (AA) says that fuel price rises will be the first major expense to hit South Africans in the wake of the recent sovereign ratings downgrades.
The depreciation of the rand against the US dollar has already affected buying prices for international petroleum, said the AA, which was commenting on unaudited mid-month fuel price data released by the Central Energy Fund.
The AA’s mid-month data is forecasting petrol to increase by up to 55 cents a litre in May, diesel by around 39 cents a litre and illuminating paraffin by an estimated 41 cents a litre.
“The loss of confidence by investors, and the sovereign ratings downgrades by ratings agencies Fitch and S&P, have led to the rand slipping heavily against the US dollar, down from around R12,35 at the beginning of the month to its current position of around R13,40,” said the association.
The AA added that the rand’s weakness “contributed three-quarters of the expected fuel price increases” at the end of the month, with hikes in international petroleum prices accounting for the balance.
“However, it is a long time until month end, and there is no certainty that the impact of the downgrades has been fully priced into the economy. The picture for May could be substantially different,” the AA warned.
The association contrasted the current position with that of the previous month.
“If the rand had stayed on its previous upward course against the US dollar, it may have been strong enough to overcome the significant increases in international petroleum prices, resulting in a smaller increase in May,” the AA said.
