SA DRIVERS TO DIG DEEP: The weakening Rand contributed to rising fuel-price increases. All grades of fuel are set to increase in June 2016. Image: AFP
Johhanesburg - Fuel prices are set for a sharp increase in June 2016, with the potential of further increases on the cards, reports the Automobile Association (AA) commenting on unaudited month-end data supplied by the Central Energy Fund (CEF).
The AA said: "International petroleum prices continued their upward march during May and the weakening Rand/US dollar exchange rate has exposed the consumer to the full force of oil's strength.
"Petrol is set for a rise of 52 cents a litre in June, illuminating paraffin will be up 61 cents, and diesel a full 78 cents."
Weak Rand, high fuel price
The Association said it was concerned by the steady rise in oil prices in the current weak Rand environment, notwithstanding international opinion that global over-supply could see prices pull back.
According to the South Africa Department of Energy, crude oil benchmarks have rallied since late April due to issues regarding geopolitical concerns affecting the market. Reductions in output in Nigeria, Columbia and the US contributed to the surge in prices during May 2016.
In response to questions from the AA the department noted that “an energy crises in Venezuela, where power outages due to a drought and subsequent reduction in power generation at the country’s main hydropower facility, was beginning to effect the wider economy including operations in the oil and gas sector.”
It noted that the recent wildfires in Canada reduced crude oil exports to the US, forcing the county to draw on inventories.
The AA concluded: "With South Africa's weak economy, our concern is that even if oil prices moderate, further declines in the Rand will mask the benefit. It is possible that fuel prices will test new highs in the coming months, placing yet more stress on consumers."