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Oil price bonanza muted by exchange rate

South Africa's sagging Rand / US dollar exchange rate continues to take the shine off ongoing international oil price weakness. This is based on unaudited mid-month data released by the Central Energy Fund (CEF).

"Had the exchange rate remained flat in 2015, South Africans would currently have been paying, on average, 45 cents a litre less at the pumps," the Automobile Association (AA) commented.

"This deficit has widened by another 32 to 40 cents in the first two weeks of January 2016, turning what would have been a 24 cents-a-litre drop in petrol at the end of the month into a potential rise of up to 16 cents."

An oil price benefit of around 90 cents a litre to the diesel price has instead been muted to around 58 cents a litre by the exchange rate, with illuminating paraffin showing a similar picture.

"The exchange rate's ongoing weakness might mean trouble for the fuel price if oil prices begin to tick up again," the Association said.

"At the current Rand / US dollar exchange rate, a return to oil's highs of 2013 and 2014 would result in the fuel price approaching R20 a litre, putting yet more pressure on South Africa's already-strained economy," the AA concluded.

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