Sharp rises in fuel prices are on the horizon. This is according to the Automobile Association (AA), which was commenting on unaudited mid-month fuel price data released by the Central Energy Fund. The AA says that unless the picture drastically improves by month-end, South Africa’s fragile economy is set for a major hit.

At this mid-month point, petrol is set for a whopping increase of 80 cents a litre, diesel is flagged for an increase of around 61 cents a litre, and illuminating paraffin for an increase of 63 cents.

“The problem is international oil prices, which have been consistently climbing with each passing day,” the Association says. “A general increase in positive sentiment as COVID-19 vaccines are rolled out has combined with upticks in global economic activity, pushing up demand for oil – and taking prices with it.”

The AA notes that the average exchange rate of the Rand against the US dollar has not, however, been a major contributor to the increases throughout the first two weeks of January.

“Despite some wild swings in the daily exchange rate, and the average rate creeping up from around R14.60 to just over R15.00, only four cents of the substantial predicted increases come from Rand weakness.”

The Association says an increase of this magnitude would make life harder still for transport companies and the many people whose livelihoods have been crushed by the economic carnage of COVID-19.

“With the Rand relatively strong by recent standards, the only hope for a reprieve relies on a pullback by oil. Unfortunately, the trend lines suggest that the situation may deteriorate further before month end,” the AA concludes.