Fuel price likely to decrease

According to the Automobile Association (AA) and First National Bank (FNB), the fuel price is set to drop in the first week of September. FNB economist Alex Smith believes that petrol will decrease by about 70 cents a litre, while the AA predicts a drop of between 71 and 77 cents.
 
Based on unaudited fuel price data for the past week released by the Central Energy Fund (CEF), the AA noted: “Petrol is set for a drop of between 71 and 77 cents a litre, diesel will be lower by 50 to 53 cents, and illuminating paraffin down by about 56 cents.”
 
According to the AA, if it were not for the current weakness of the Rand against the US Dollar, the decrease could have been higher. “But the Rand's weakness against the US dollar has been expensive for motorists; fuel prices would have dropped by an additional 25 cents a litre if our currency had remained at its late-July levels.”
 
What does this mean for consumers?
 
Smith noted: “Given that we also had a sizable petrol price reduction in August, it looks as if inflation for both August and September will come in below July’s inflation rate.
 
“As a result the South African Reserve Bank (SARB) will probably revise down its inflation forecast for 2015. Nevertheless, it is likely that inflation will rise towards year-end and into next year.”
 
Will interest rates still go up?
 
According to Smith, “the slightly lower inflation trajectory is good news for the consumer as inflation erodes the value of disposable income.  However, we remain of the view that the SARB will lift interest rates once more before the end of the year, due to the weakness of the Rand and the fact that inflation is still likely to rise.
 
“As a result economic conditions are likely to become more challenging for consumers, notwithstanding this recent reprieve,” added Smith.
 
The international petroleum price recently reached a six-year low, however, the AA is concerned about the possible impact on consumers when the price stabilises or increases, as “motorists will be fully exposed to any Rand weakness,” revealed the AA.