Brace for a 33c petrol price hike, say economists
The price of petrol is likely to rise by at least 33c a litre next Wednesday—but the increase could be far higher.
According to Econometrix economist Tony Twine, the Fuel Retailers Association has been looking for a margin increase of around 15c a litre which, if granted in time, could see the petrol price at R10.48 per litre next month—2c shy of its all-time high.
“This increase did not occur in August or September, so it still has to be implemented once it has been approved by the National Energy Regulator of South Africa,” said Twine.
But should this adjustment not be implemented by next week, the fuel price was likely to go up by around 33c per litre, which was the average unit under recovery on Thursday, the last day for the price fixing as the Department of Energy will announce the price increase on Friday.
This will take the price of petrol in Gauteng to R10.33 per litre. At the start of 2006, petrol cost R5.49 per litre, which means it has practically doubled in the last five years.
And, according to Twine, another big rise in fuel prices could be on the cards for November if oil prices remain around current levels and the rand remains weak.
However, Twine believes that the rand could stabilise or strengthen a bit after its sudden and precipitous fall, which was exacerbated by importers making final orders for the upcoming Christmas period.
Meanwhile, Dow Jones Newswires reports that Morgan Stanley has cut its Brent crude forecast for 2012 to $100 a barrel from $130 a barrel on the prospect of returning supply from Libya and the North Sea and weaker global demand.
The move follows similar price outlook downgrades by JP Morgan and Citigroup in August, both of which cited waning demand and an improving supply picture. Goldman Sachs, however, last week reiterated its forecast for higher prices, expecting Brent crude to average $130 a barrel next year due to tight supply.
Morgan Stanley expects about 800 000 barrels a day to come online globally by the end of 2011, about half of which will come from Libya.
Inventories will likely build in the first half of 2012 because of weaker global demand, it said in a report.
“Unlike 2008’s demand shock, the inevitable demand slowdown and increase in Libyan production has provided plenty of warning,” the report said. “Consequently, Opec is being more proactive this cycle with plans to cut production by 1.4-million barrels a day through the second quarter of 2012.”
Morgan Stanley said its price forecast for Brent in the first half 2012 is skewed to the downside, with prices heading as low as $85 to $90 a barrel depending on global growth rates and the speed that Libyan exports resume.
The price of Brent crude was hovering around the $104 per barrel level on Thursday.—I-Net Bridge