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Luckily for South Africans, the world crude oil price and a slightly stronger Rand has seen record petrol prices as experienced during the last latter half of 2018 subsiding to levels far below the record levels reached. Thanks to a large drop in the petrol price in December 2018 as well as in January 2019.
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So the fuel price story is pretty sad? Well it was towards the end of last year. Not anymore
The line graphs below shows the monthly retail petrol price for 95 Octane petrol at the Reef (inland) vs the 95 Octane petrol price at the coast. The reason the prices are different is due to the fact that South Africa's refineries are located close to the coast, and shipping costs to get the fuel inland accounts for the difference in prices between coastal areas and inland areas. Inland, where most of South Africa's fuel is bought, as the majority of vehicles are found in Gauteng, saw a record high 95 Octane fuel price of R17.08 a litre. The latest fuel price as announced by the Department of Energy and that came into affect yesterday (2 January 2019) was R14.01 per litre of 95 Octane at the reef. That is a 17.97% decline in the fuel price on a couple of months, or R3.07
The November 2018 fuel prices were officially the highest retail fuel prices ever in South Africa, beating the highest fuel prices in history of the previous month and the month before that. But thanks largely to lower world crude oil prices, South African consumers gets a reprieve. Even if it is a very small one. Sadly the South African Reserve Bank (SARB) monetary policy committee (MPC) was a little quick on the draw and raised interest rates in November 2018. Immediately after that one of the biggest drivers of South Africa's inflation (the petrol price) came tumbling down with almost 18% in two months. Now the deed is done, the SARB MPC will not cut rates now as they will look like a bunch of amateurs for raising and cutting rates in such a short amount of time. And the odd thing is the SARB raised interest rates even though their own forecast of the longer term inflation rate came down. So why raise rates when their expecations of long term inflation was on the decline? It was a odd decision and we believe it was taken in order to try and protect the vulnerable Rand instead of trying to curb inflation.
Unfortunately the small gains from the lower fuel price in the last couple of months is hardly enough to offset the increased pain South African consumers are feeling due to the higher interest rates. Bonds, cars, loans, clothing accounts all costing more to pay off now due to a hasty decision taken by SARB in order to protect the Rand instead of focussing on their real mandate which is price stability and which based on their own forecasts showed was well within their target range and the long term prediction was even lower levels of inflation
Unfortunately the small gains from the lower fuel price in the last couple of months is hardly enough to offset the increased pain South African consumers are feeling due to the higher interest rates. Bonds, cars, loans, clothing accounts all costing more to pay off now due to a hasty decision taken by SARB in order to protect the Rand instead of focussing on their real mandate which is price stability and which based on their own forecasts showed was well within their target range and the long term prediction was even lower levels of inflation