South Africans will need to brace themselves for a steep fuel increase in May, with both 93 and 95 expected to increase by 74c and 80c per litre respectively. Motorists utilising diesel will see a decrease between 18c and 41c.
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Despite the recent strengthening of the rand, motorists in South Africa are unlikely to receive any respite at petrol pumps next month due to the sustained elevated global oil prices.
Although there was a boost in the local unit this week following the easing of tensions over potential rate hikes in the United States, the rand is still facing pressure from continued power outages in South Africa, which have expected economic repercussions.
As reported by BusinessTech, the impact of a stronger rand on local fuel prices is significant, as it is one of the two primary factors that determine the costs in South Africa.
While the rand has been volatile lately, its strengthening is considered positive news for fuel prices. However, despite the slight strengthening of the rand, the impact of the rising oil prices cannot be offset.
The global oil prices have remained steady at around $85 per barrel, which has contributed to the continued increase in fuel costs in the country.
Bloomberg‘s analysis has revealed that global oil prices have remained within a certain range since experiencing a sharp spike at the beginning of the month due to supply cuts by oil producers.
The crude prices have recently rebounded following a tumultuous period in the banking sector, where they had fallen to a 15-month low in mid-March.
The surprise announcement by OPEC+ on production cuts and reduced Iraqi flows has contributed to some of the gains, stabilising oil prices.
‘There still appears to be some concerns over the broader demand outlook, and weaker refinery margins will only be adding to these concerns,’ it said.
According to Investec chief economist Annabel Bishop, the rising oil prices could have a negative impact on inflation in South Africa, leading to an increase in fuel prices and other associated costs.
She emphasised that for effective countermeasures against these price increases, the rand would have to strengthen to below R16 to the dollar. She also stated that this could only be achieved through a 100 basis point interest rate hike.
The hike in interest rates would play a significant role in strengthening the rand and could assist in stabilising the economy.
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