A weaker rand and the pervasive gloom that has hit the global markets are cutting the benefits of lower crude oil prices for South African motorists hoping for another big fuel price decrease, according to economists.

The weaker rand has left hopes of another, bigger decrease based on the international oil price at low levels. A rebound in the oil price could end the honeymoon of fuel price decreases.

Doret Els of Efficient Group yesterday said the turmoil in global financial markets had heightened fears of slower economic growth, resulting in a falling international crude oil price. In addition, the rand had weakened, with risk-averse investors shying away from emerging markets assets.

"Global investors have been selling their portfolios, leading to capital outflows," she said.

While the weaker rand — hovering at more than R8 to the dollar — has dampened the average overrecovery of petrol, diesel and illuminating paraffin in the period between end of last month and Monday, consumers could expect another bout of fuel price decreases, another economist said.

Oil outweighs rand

Russell Lamberti of Econometrix Treasury Management yesterday said: "The oil price fall has been bigger than the rand's weakening. The weaker rand, therefore, does not outweigh the falling oil price. So, at this stage, it looks like there will be another fuel price cut in October."

Lamberti said the bigger risk was a rebound of the oil price to 100-a-barrel levels. "If that does not happen, there are strong chances of another fuel cut. Had the rand stayed at approximately R7.50 to the dollar, we would be looking at a larger cut in October."

According to Central Energy Fund daily updates on fuel prices, there was overrecovery on petrol of 25.99c/l, and overrecovery on diesel of 71.53c/l and 71.07c/l, on the 0.05 percent and 0.005 percent varieties respectively . There was overrecovery on paraffin of 73.77c/l.

The figures could have been higher had it not been for the effect of the weaker rand. "The over recovery for petrol, for instance, could have been in the region of 46c/l but the weaker rand took out about 20c/l," Els said. If the effect of the rand was excluded, there would have been overrecovery on diesel by more than 94c/l and paraffin by 97c/l The weaker rand has a negative effect on fuel prices because SA buys crude in dollars.

The minerals and energy department this month cut fuel prices. Grades of petrol were down by between 69c/l and 78c/l The varieties of diesel decreased by between 144c/l and 146c/l.

Business Day