Following last week’s OPEC+ meeting which voted against increasing oil output combined with the increased demand for oil as some economies continue to recover from COVID -19 due to more people being vaccinated, oil prices have seen a significant surge that will eventually hit our pockets.
Oil prices continue to rise to the highest since 2014. Brent crude has been trading above the $80 a barrel last week and has been holding above that significant level while US oil has also seen a push on the upside. Oils prices are priced in US dollars, therefore, a weaker rand against the dollar will result in making it a little bit more expensive for South Africa to purchase oil prices in US Dollars.
The rand has not been performing well for the past two weeks and has seen a slow slight recovery. If the rand continues to trade above R15 to the dollar, the prices of fuel could significantly rise.
Why should you care about oil prices and cheer for a stronger Rand?
With the price of Brent crude trading at the levels it has been since last week, coupled with the weaker rand, South Africans should expect fuel prices surge to record highs this November.
A stronger rand will mean that South Africa can buy oil at a lower price while a weaker rand will result in South Africa buying oil at a higher price. So to offset the oil price surge, the rand needs to find its grip against the dollar. Unfortunately, the rand has not been able to hold steadfast against the dollar and some analysts believe it could further lose its grip.
An economist at the Bureau for Economic Research(BER) suggested that a “notable rise” in the price of fuel from November should be expected by South African motorists.