Expect increases rather than decreases in fuel price

South Africans have a slim chance of any sustained period of lower fuel prices. In fact, according to an assessment by Absa Asset Management Private Clients, further increases rather than decreases are still possible. According to Absa advisers, the driver of any drop in pump prices has to be the basic fuel price (BFP) element in the calculation carried out every month by the Central Energy Fund. The BFP is the underlying cost of fuel and can be thought of as the cost of importing a litre of petrol from international refineries. The trend in the BFP is monitored by consumers through global benchmark prices such as Brent crude (the price from this North Sea oilfield), West Texas Intermediate or WTI, Dubai crude and the OPEC reference price from its basket of crude prices. Craig Pheiffer, general manager investments at Absa Asset Management Private Clients, suggests local motorists will look in vain for relief from the non-BFP components of our pump prices – items such as transport and delivery costs, wholesale and retail margins and taxes, including the general fuel levy, the Road Accident Fund levy and customs and excise duties. “It’s unlikely that taxes and delivery costs and margins will be reduced in (our still) regulated environment and that’s why the consumer’s hope lies in a lower oil price in the BFP.” The bad news is that forecasts from Absa’s UK sister-company Barclays Capital indicate the BFP could face upward rather than downward pressure. The British colleagues of the team at Absa Private Clients projects an average 2012 price of US$120 a barrel for Brent crude oil, up from $111 last year, while West Texas Intermediate is projected to average US$105 a barrel in 2012, up from $95 in 2011. Barclays Capital also forecasts that global crude demand for 2012 will reach 89.8 million barrels a day.