Africa-Press – South-Africa. South African motorists are in for some relief at the pumps in May, with forecasts indicating a minor cut for petrol prices and more substantial reduction in the price of diesel.
This is largely due to the price of oil plunging over the past month on the back of US President Donald Trump unveiling extensive tariffs on goods imported into the world’s largest economy.
These tariffs are likely to hit global trade and the economy, weakening the demand outlook for oil and other commodities.
The rand has weakened slightly against the dollar, undoing some of the benefit of a weaker oil price as investors shift away from emerging market assets in favour of relatively ‘safer’ assets.
South Africa’s Central Energy Fund (CEF) tracks the price of oil and the rand-dollar exchange rate to forecast the expected changes to the price of fuel at the pumps for the coming month.
Its latest data indicates the following changes to the prices of petrol and diesel in May –
Petrol 93 – decrease of 18 cents per litre
Petrol 95 – decrease of 19 cents per litre
Diesel 0.05% – decrease of 37 cents per litre
Diesel 0.005% – decrease of 37 cents per litre
Trump’s imposition of tariffs on goods entering the United States has sparked a trade war with its largest trading partner, China.
The US President walked back his higher reciprocal tariffs to implement a 90-day pause for negotiations for everyone except China.
The Asian country has retaliated strongly against the United States’ tariffs with its own tariffs and other trade restrictions.
This trade war between the world’s two largest economies has hit the outlook for oil demand, with investors broadly expecting both the US and Chinese economies to slow.
Brent slipped below $65 a barrel, extending its decline to over 13% for the month, as data indicated that US manufacturing output weakened significantly, while China has asked its oil refineries to limit their production.
This is near the lowest level in four years, and the decline is compounded by Iraq’s plan to cut its oil exports as it faces pressure to adhere to its Organisation for Petroleum Exporting Countries (OPEC) production target.
On the other hand, the rand has strengthened back below R19/USD due to the pause in tariffs on goods imported into the United States.
Ongoing talks between members of the Government of National Unity (GNU) have also calmed investor fears about the ruling coalition’s collapse less than one year after its formation.
The country has also benefited from the tariff fallout, with a rising gold price and falling oil prices boosting the short-term outlook for the country.
“Gold strong, oil weak looks very pretty for South Africa,” said Nicky Weimar, chief economist at Nedbank, adding the main benefit is from lower energy import costs.
She cautioned that the country doesn’t earn as much from gold as in the past, and the prices for its other exports, including platinum and coal, have also been hurt by the same concerns over global growth. But net/net, South Africa looks to be coming out ahead.
“Does this psychologically give the rand a boost? Without a doubt,” she said. “It does help to calm inflation fears, and that obviously feeds through to interest rates.”
For More News And Analysis About South-Africa Follow Africa-Press
