THE price of petrol could revert to above R20 per litre as oil prices climbed to over seven-year highs yesterday due to concerns around global supply.
Brent crude oil prices jumped more than 1 percent to $87.67 (R1367.74) per barrel by noon yesterday, the highest since October 2014, after Yemen’s Houthi group attacked oil tankers in the United Arab Emirates on Monday.
At least three oil tankers carrying fuel exploded during the five ballistic missiles and several drone attack, and the rebel group has threatened further attacks on more facilities in the UAE.
The UAE ranks seventh in the world in terms of crude oil production as it produces an average of around 2.5 million barrels of oil daily.
This dramatic global oil price increase will have an impact on South African consumers as the country imports an increasing amount of both refined fuel and crude oil.
The Bureau for Economic Research (BER) has noted that a combination of oil demand holding up and supply disruptions had boosted the oil price at the beginning of the year.
“After some reprieve on the domestic fuel price front in January, the renewed rise in the oil price is likely to result in another hefty fuel price increase in February,” the BER said.
South African local fuel prices are determined by international oil prices and the dollar:rand value.
The average price of petrol per litre in South Africa currently stands at R19.61.
The mooted increase in the petrol price will naturally affect the prices of all other goods and transport costs, pushing consumer inflation higher.
Investec chief economist Annabel Bishop agreed that sharply rising oil prices heralded an increase in fuel prices in February.
“A petrol price hike is on the cards for South Africa in February, unless the oil price drops back to $75 per barrel or less today, and then remains the same or lower for the rest of the month, which is not seen as currently likely,” Bishop said.
“An oil price above $80 per barrel, with the rand at R15.25/$1 heralds a petrol price increase of at least 5 percent, close to at least R1 per litre.”
Last month, the cost of petrol rose by 81 cents a litre to above R20 per litre in inland provinces, following another R1.21 per litre hike in November, after the average Brent crude oil price increased to its highest level since October 2018.
Markets.com chief market analyst Neil Wilson attributed a certain amount of geopolitical risk premium from the situation on the Ukraine-Russia border.
“Of course, this rally to previous peaks has plenty talking about $100 oil again ... not so sure this can last but a sustained break above the $85.60 highs could see a breakout to $90,” Wilson said.
“Goldman Sachs is out with forecasts today saying Brent could hit $96 in 2022 and $105 in 2023.”
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