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Petrol Price: Bad news for motorists, home owners

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South African motorists may have to dig deeper to fill up their vehicle tanks in November as the petrol price is expected to rise, the Bureau for Economic Research (BER) has warned on Monday.

And apart from the rising petrol price, consumers may also be faced with the first interest rate hike in months when the Monetary Pricing Committee meets next month, the BER forecast in its Weekly Review. 

“Combined with disappointment after the OPEC+ oil grouping voted against a more aggressive ramp-up of oil output, the increased demand for oil amid the gas price surge pushed the Brent crude oil price comfortably above $80/bbl last week. This is notably higher than the average of $75/bbl in September,” the BER said.

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“If sustained, the current oil price should see a notable rise in domestic fuel prices in early November. As always, the extent of the increase will also depend on local currency moves in the rest of the month,” the BER said.

This comes after the price of Brent Crude oil rose steadily during September and increased by 4% in the first week of October to hit $83.59 a barrel by Monday 11 October. The price of US oil rose to $80.81 a barrel, a price last seen in late 2014. 

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SA petrol prices dropped by between 1 and 4 cents per litre in the first week of October, while diesel prices rose 23 cents per litre.

The demand for oil has been driven by increased economic activity as countries move out of hard coronavirus lockdowns. Bloomberg reported that OPEC and its allies had planned to release just 400,000 barrels a day to the market in November, which had also fuelled the steep price hikes.

The BER earlier forecast that the SA Reserve Bank would hike interest rates in early 2022 but has now adjusted its position expecting the start of the upward cycle in November. 

“The SARB Monetary Policy Committee (MPC) has consistently emphasised how data-dependent their decisions are, but also that future policy moves will be sensitive to the balance of risks to the outlook. While both the July and September MPC statements flagged upside inflation risks, the MPR (Monetary Policy Review) took this up a notch. It argued that the risks to the medium-term inflation outlook have ‘sharply increased’,” the BER said

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“According to the MPR, the MPC will soon start to face a trade-off between an earlier, more gradual start to the normalisation process and a steeper rate hike trajectory if the start of the process is delayed. Clearly, the former would be less disruptive to the economy. Therefore, we are now pencilling in the first 25bps repo rate increase at the November MPC meeting,” the BER noted.

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