THE PRICE of Brent crude oil rose to above $85.90 (R1 254) a barrel yesterday, the first time since October 2018, as constrained supply was unable to keep up with a rising demand following the reopening of global economies.
Market tightness has been intensified by shortages of natural gas and coal in Europe and Asia, which can boost demand by as much as 450 000 barrels a day in the fourth quarter. Market speculators have gone as far as predicting that oil prices could rise as high as $100 per barrel before the year ends, triggering price hikes across the board.
Current data in South Africa is predicting fuel price hikes of unprecedented proportions for November.
Unaudited mid-month data from the Central Energy Fund indicates that petrol could increase by 99 cents a litre, and diesel and illuminating paraffin by a whopping R1.42 a litre. This will push the petrol price of 95 unleaded inland above R19 per litre (around R19.30 per litre) and R17 per litre for diesel.
The Automobile Association (AA) said taking this potential increase into account, the price of a litre of fuel inland would have increased from R14.86 per litre in January to R19.30 per litre in November, a 30 percent increase over 11 months.
The AA said the hikes would be the largest in South African history, bearing in mind that this was only based on half a month’s data.
“R20 a litre for petrol is now a realistic scenario before the end of 2021,” says the AA, adding that it sees little hope of improvement before the end of October.
“Brent Crude has broken through the $85 per barrel mark and the basket of oil prices used to calculate South Africa’s oil price are following Brent higher.
“We note the concern this is generating in the US, where President Biden was reported to have called on the Opec+ cartel to increase oil output to stabilise prices.
“This has not generated a response from Opec+, and our view is that a response is not likely, since the current price pressures are beneficial to the cartel’s members.”
The AA also said the rand was still far above its June level of below R13.50 to the dollar, but the strengthening trend lasting nearly 15 months was abruptly reversed in June.
The average rand/US dollar exchange rate jumped from around R14.55 to the dollar, to R14.90 over the first half of October. “South Africans are paying at the pumps for weak governance,” the AA said.
BUSINESS REPORT