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We take a look at the latest export price growth for South Africa's coal exports and compare it to the import price growth of South Africa's crude oil imports.
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Crude oil import prices vs Coal export prices
The line graph below shows the year on year price growth rates (inflation rates) of both South Africa's Coal exports and South Africa's Crude oil imports. So why compare these two? Well Coal is one of South Africa's biggest exports, while Crude oil is one of South Africa's biggest imports, and the fortunes of crude oil and coal is very closely linked. So how have these two price series behaved over time?
As the graphic above shows, that while the magnitude of the movements experienced are different for Crude and Coal, the overall trends are very similar between the two. The main concern for South Africans and the petrol price is the sharp increase in the annual growth rates of Crude oil in recent months. The price of Crude oil imported in August 2018 is 56.2% higher than that if August 2017. That is a massive increase in the import price of one of South Africa's biggest imports. The strong increases are due to a combination of factors, the main ones being a weak Rand/Dollar exchange rate as well as stronger global crude oil prices.
So to South African motorists wondering why fuel prices keep going up. Well this is why, the price if importing a kilogram of crude oil has increased by 56.2% over a 12 month period. And as the input costs rise, so does the price of the output. Crude is the input into petrol so if crude oil import prices go up, so will the price of fuel.
World Crude oil prices have been very strong. In fact it is one of the few asset classes to actually deliver any form of decent returns during 2018. Below a paragraph or two from a Bloomberg article supporting this:
"The October stock rout has delivered a wake-up call to money managers searching for shelter this year.Swelling dollar-funding costs, equity volatility and fissures in the synchronized growth story are punishing assets across the globe. A month ago, U.S. stocks were one of just a handful of markets that had doled out a decent return in 2018 -- before $2 trillion was wiped off their value in the space of a few weeks. While the S&P 500 Index pared some losses Thursday, U.S. futures signaled a lower open on Friday amid downbeat results from Amazon.com Inc. and Alphabet Inc.
European shares are in worse shape. The Stoxx Europe 600 Index has shed over 10 percent this year in dollar terms. Meanwhile, cash has dethroned risk assets, with an index of U.S. Treasury bills returning about 1.4 percent. “So much for gains on my investment portfolio this year,” wrote Bill Blain, strategist and head of capital markets at Shard Capital in London, in a note. On the current trajectory, investors will be left with just the dollar and crude oil as the few major asset classes to eke out a decent gain for the year. Treasuries and risky corners of the credit world are still in the green." - Original article can be found here
Hold on South Africans, as higher crude and fuel prices will filter through into higher rates of inflation, which will force the South African Reserve Bank (SARB), Monetary Policy Committee (MPC) to raise interest rates to curb inflation. So you think making ends meet now is though. Its about to get a whole lot tougher in South Africa.
So to South African motorists wondering why fuel prices keep going up. Well this is why, the price if importing a kilogram of crude oil has increased by 56.2% over a 12 month period. And as the input costs rise, so does the price of the output. Crude is the input into petrol so if crude oil import prices go up, so will the price of fuel.
World Crude oil prices have been very strong. In fact it is one of the few asset classes to actually deliver any form of decent returns during 2018. Below a paragraph or two from a Bloomberg article supporting this:
"The October stock rout has delivered a wake-up call to money managers searching for shelter this year.Swelling dollar-funding costs, equity volatility and fissures in the synchronized growth story are punishing assets across the globe. A month ago, U.S. stocks were one of just a handful of markets that had doled out a decent return in 2018 -- before $2 trillion was wiped off their value in the space of a few weeks. While the S&P 500 Index pared some losses Thursday, U.S. futures signaled a lower open on Friday amid downbeat results from Amazon.com Inc. and Alphabet Inc.
European shares are in worse shape. The Stoxx Europe 600 Index has shed over 10 percent this year in dollar terms. Meanwhile, cash has dethroned risk assets, with an index of U.S. Treasury bills returning about 1.4 percent. “So much for gains on my investment portfolio this year,” wrote Bill Blain, strategist and head of capital markets at Shard Capital in London, in a note. On the current trajectory, investors will be left with just the dollar and crude oil as the few major asset classes to eke out a decent gain for the year. Treasuries and risky corners of the credit world are still in the green." - Original article can be found here
Hold on South Africans, as higher crude and fuel prices will filter through into higher rates of inflation, which will force the South African Reserve Bank (SARB), Monetary Policy Committee (MPC) to raise interest rates to curb inflation. So you think making ends meet now is though. Its about to get a whole lot tougher in South Africa.