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Business Times writes that with the Covid-19 disaster having shut down much of the world economy, demand for oil has collapsed.
Brent crude fell briefly last week below $20 a barrel for the first time in decades, and is still trading at just above $20 a barrel. That's an economic bright spot for SA even if cheaper petrol isn't much use to motorists in the lockdown. With demand for fuel down by 60% or more, four of SA's refineries have shut down, with only Sasol's Secunda plant and PetroSA in partial production. SA's inflation consumer rate is already benefiting from lower oil prices and stands to benefit even more in the months to come. It will also help to justify a further interest rate cut by the SA Reserve Bank (Sarb). The rand price for oil is now about 40% lower than a year ago. "That's enough to push headline inflation down, probably to below 3%, even though petrol is only about 5% of the CPI basket," said Old Mutual investment strategist Izak Odendaal. The March inflation rate, released last week, decreased to 4.1% from 4.6% in February, mainly because of fuel-price disinflation and April's numbers will benefit as well. Sarb this month revised its inflation forecast down to 3.6% this year and 4.5% next year and it may cut its forecast further. But with the government now seriously cash-strapped, there's a good chance of it taking advantage of lower prices to implement another hike in the fuel tax.
- Read the full original of the report in the above regard by Hilary Joffe at BusinessLive
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