Fuel price relief likely in April as rand firms

The rand firmed further against the US dollar on Thursday night, edging close to the psychological R18 mark and fuelling expectations of fuel price cuts in April.

It traded over 1% stronger, at around R18.07 to the greenback, buoyed by the US Federal Reserve raising interest rates by 25 basis points on Wednesday.

Read: Rand strengthens after Fed rate decision

If the rand stays at current levels or strengthens further by the end of March, fuel prices are expected to ease across the board in April, according to the Automobile Association of South Africa (AA).

“The numbers today [Friday] are showing that a decrease across all fuel is most likely going to happen,” AA spokesperson Layton Beard told Moneyweb.

“We have to bear in mind that the adjustment is happening on the 5^th of April, which is the first Wednesday of April … There’s still 10 days between now and then, so it’s very likely that there’s going to be a decrease,” he added.

Earlier signs

The AA’s mid-month assessment of Central Energy Fund (CEF) fuel data had already indicated that diesel and illuminating paraffin prices would see a decrease in April on the back of lower international oil prices.

At the time, diesel prices were expected to drop by 20 cents a litre and illuminating paraffin by around 68 cents a litre.

Petrol vehicle owners were not expected to be as lucky in terms of the mid-month data, with the AA initially forecasting petrol prices rising by 25 cents a litre.

But with the rand firming this week, the AA believes the fuel price relief will now be felt by all motorists in April.

“The data has been indicating a decrease ever since mid-month for diesel … But the underrecovery for petrol – in other words the increase for petrol – has been coming down as well, [which means] it’s pretty much flat at the moment,” said Beard.

With no underrecovery in petrol now expected, further rand strength will see petrol also decreasing in April.

Indicator to watch

However, Beard noted that it will be important to keep an eye on the rand’s performance against the US dollar moving forward, as this will influence how the fuel price pendulum will swing for motorists.

Another factor benefitting motorists according to the AA is National Treasury’s decision to keep fuel levies unchanged for 2023 in the recent SA Budget.

This is the second year in a row that government has opted not to increase the Road Accident Fund Levy and General Fuel Levy.

“Fuel levies are traditionally increased in April, but the Minister of Finance heeded calls by the AA and in his February Budget Speech indicated that this will not happen this year,” said the association.