The volatile, but weaker exchange rate, coupled with a higher crude oil price, could mean a steep rise in fuel prices this October; this is on the back of the recent September increase. A fair estimate gauges an average increase of approximately 40 cents/litre for petrol and diesel. This unwelcome set of news will impact grain producers as they are on the eve of a new planting season.
According to the mind-month figures from the Central Energy Fund, the actual increase on the product price component of crude oil was between 35-42 cents / liter. The better than expected performance of the exchange rate for the first two weeks of September meant that an over recovery of 8 cents / litre was achieved – offsetting the actual price, thereby reducing how much the price could have gone up by.
The change of season in the Northern hemisphere, normally resulting in higher demand, the volatility of the Rand against major currencies, and the general investor confidence may see another increase before the year is out. Since fuel is a non-discretionary expense for the consumer, these types of movements is not good news for the man on the street. A secondary and longer term effect will be on inflation and which also impact the consumer in terms of food prices however, the recent record harvest and decline in food inflation should serve as a buffer for possible interest rate increases.