Rate hike for Christmas?

International oil prices galloping towards $90 a barrel could force another petrol price increase next month and South Africans may also need to brace themselves for a further hike in interest rates, just in time for Christmas. A strengthening rand may, however, be just the white knight consumers need.

The oil price has been identified as one of the main causes of inflation, and has trended steadily upwards for months now. Reserve Bank Governor Tito Mboweni (pictured right) has promised that the bank will not hesitate to act should inflation continue to rise. The bank’s next monetary policy committee will meet again in December to decide on rates.

Connel Ngcukana, director of the SA Petroleum Industry Association, said the under-recovery in the petrol price at present meant there could be an increase of 7c a litre next month, but it was too early to tell. The stronger rand had, however, dampened the effect of the higher oil price.

The rand was trading at R6,77 to the greenback on Thursday, down from an overnight close of R6,82, I-Net Bridge reported. It added that the rand has traded strongly because of dollar weakness.

Tony Twine, an economist with Econometrix, cautioned that although oil price increases could be inflationary it was not yet known where they would settle. ‘The rule of thumb, although I wouldn’t want to run a refinery on it, is that every dollar move in the oil price results in a 7c a litre price increase in the refined product. So, a move from $80 to $84 results in a 28c increase. A 10c move in the exchange rate results in a 2,2c a litre refined product increase. So to offset a one-dollar move in the oil price, you need a 30c appreciation in the exchange rate,” he said.

Economist Dawie Roodt of the Efficient Group said there was a good chance the Reserve Bank might hike rates again after the December meeting.

A dangerous cocktail of rising tension in northern Iraq, strong energy demand and unprecedented weakness in the price of the dollar pushed the oil price to new heights this week. On Thursday, Reuters reported that London Brent was down $0,18 at $82,95.

Oil prices have quadrupled since 2002 and are up more than 40% this year alone as the oil cartel, Opec, increased its price target but kept its production levels steady, gradually ratcheting up the value of crude.

The latest spur to prices has been tensions between Turkey and Kurdish separatists in northern Iraq, with the Cabinet in Ankara asking Parliament for permission to launch a major attack. This has triggered widespread fears that an already fragile military and political situation in the Middle East will be further destabilised.

We make it make sense

If this story helped you navigate your world, subscribe to the M&G today for just R30 for the first three months

Subscribers get access to all our best journalism, subscriber-only newsletters, events and a weekly cryptic crossword.”

Elvira Van Noort
Guest Author

Related stories


Already a subscriber? Sign in here


Latest stories

How The Ghost have kept Orlando Pirates alive

Supporters’ branches, despite financial challenges, have been the lifeblood of football teams in South Africa

Zuma takes aim at Zondo following release of final report

Former president intends to review aspects of the full report, in which he has been directly implicated in wide-scale looting of the state

Gauteng ANC conference likely to produce mixed bag of leaders

No slate is expected to emerge victorious as poorly coordinated conference finally gets under way

Kenya opposition leader selects woman as running mate

For the first time a woman is running on a major presidential ticket – a big marker in Kenya’s history. But for marginalised voters, the politics of representation comes with many contradictions

press releases

Loading latest Press Releases…