Oil prices have fallen to a four-year low, and the most recent 60 cents a litre reduction in the diesel price is a local indicator of this movement, along with a relatively stable rand exchange rate of about R11 to the US dollar. But how long can this rather happy situation for road users last? “We would hope that things would stabilise about the present levels,” said Garth Bolton, joint CEO of road transport major, Cargo Carriers. But, he added, he was not convinced that the oil price would drop much more, nor was the rand likely to get too much stronger. However, economists who have studied things in depth have concluded that there is an unusual scenario in the immediate reaction amongst the oil-producing nations to these latest price drops. Whereas the normal response to a falling price and increased demand would be to restrain oil supplies to push the price back up again, the exact opposite seems to be happening. Despite the lower price and increasing demand a number of the major producers – including the biggest – are actually pushing up the supply and putting further downward pressure on the price. Crude oil prices remain under pressure, according to a report released to FTW by Standard Bank Research, with Brent crude falling to as low as US$82.08/barrel – a level last seen in 2010. “Weaker oil prices should assist in narrowing SA’s current account deficit via the benefit they offer to SA’s terms of trade, and thus should be – broadly speaking – positive for the rand. However, a lower oil price should also act downwards on inflation.” Of course, should the rand weaken, the local price of fuel would increase again, the bank added. “But,” Bolton noted, “this current scenario has seen a 4.5% reduction in our fuel price. An amount that will be passed on to the customer as our fuel surcharge has been reduced appropriately.”
