Surging international petroleum prices are likely to hit South Africans hard at the pumps at the beginning of 2017. This is the view of the Automobile Association (AA) which was commenting on unaudited mid-month fuel price data released by the Central Energy Fund (CEF).
“Saudi Arabia has indicated that its crude oil production cuts may go beyond those proposed in November,” the AA said. “There are also signals that non-OPEC members may voluntarily decrease production, which has the potential to further bolster international petroleum prices.”
The first fortnight of December showed a strong appreciation in oil prices, while the Rand remained volatile against the US dollar. Based on the current data, the indicative increase in fuel prices at the end of December will be around 27 cents a litre for petrol, 21 cents for diesel and 28 cents for illuminating paraffin.
The AA warned that the impact of production cuts was by no means factored into current oil prices.
“If the oil-producing countries adhere to the proposed production cuts, oil prices are likely to strengthen until demand and production move back into equilibrium,” the Association said.
“Even a stronger Rand could be overpowered by a sharp climb in the oil price, potentially meaning a succession of fuel price hikes which could impact the economy strongly over the next few months.”
The AA advised private motorists to review their energy use and commuting patterns, and consider alternatives to single-occupant vehicle use, such as car-pooling. The motoring body added that a rising fuel price was also an incentive for corporate delivery fleets to re-assess vehicle selection and routing schedules to maximise fuel-efficiency.
“Mitigation will be the key strategy against prolonged fuel price rises,” the Association concluded.