AA predicts substantial fuel price reductions for SA

By: CAR magazine

International petroleum prices this week suffered one of their steepest plunges in recent years as coronavirus fears impacted global economic activity.

The silver lining in this cloud are predicted substantial fuel price reductions for South Africans. This is according to the Automobile Association (AA), which was commenting on unaudited month-end fuel price data released by the Central Energy Fund.

“The impact of the novel coronavirus outbreak on global economic activity cannot be over-stated, and petroleum prices have retreated in lockstep with the downturn across world markets,” the AA says.

“Under normal circumstances, we would be focusing on our serious concerns over the Rand’s trajectory, with the local currency having depreciated by nearly 30 cents against the US dollar since the start of February. However, these declines have all been overrun by the pullback in oil.”

The Association says it forecasts that month-end fuel price declines of between nine and 19 cents a litre are on the cards for petrol, 55 cents a litre for diesel, and 68 cents for illuminating paraffin.

“It is difficult to predict where current events might lead us. The Rand has not found strength against the US dollar since Finance Minister Tito Mboweni’s budget speech, and the consensus of economists is increasingly that South Africa is set to lose its last remaining investment grading before long,” the AA says.

“This will inevitably affect the Rand/US dollar exchange rate, but the precipitous global decline in confidence and economic output as the coronavirus outbreak spreads could provide a balancing factor in the form of lower international petroleum prices.”

The Association says South African fuel users should not take any outcome for granted, since the full effects of the coronavirus and future South African economic conditions are far from clear.

“Knock-on effects cannot be predicted and it would be unwise to budget for further fuel price drops at this stage,” the AA concludes

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