Identifier
Created
Classification
Origin
05PRETORIA3620
2005-09-08 11:32:00
UNCLASSIFIED
Embassy Pretoria
Cable title:  

South Africa: Fuel Prices Continue to New Record

Tags:  EPET ENRG ECON EIND SF 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 PRETORIA 003620 

SIPDIS

STATE PLEASE PASS USGS
USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND
DOE FOR Thomas Sperl

E.O. 12958: N/A
TAGS: EPET ENRG ECON EIND SF
SUBJECT: South Africa: Fuel Prices Continue to New Record
Highs

Summary
-------

UNCLAS SECTION 01 OF 02 PRETORIA 003620

SIPDIS

STATE PLEASE PASS USGS
USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND
DOE FOR Thomas Sperl

E.O. 12958: N/A
TAGS: EPET ENRG ECON EIND SF
SUBJECT: South Africa: Fuel Prices Continue to New Record
Highs

Summary
--------------


1. (U) On September 7, the Department of Minerals and
Energy increased the prices of gasoline and kerosene to
new all-time highs, and slightly decreased the price of
diesel. All of the increase was caused by the higher
international price of crude oil. A stronger rand in
August (the rand strengthened by 3.5%) lessened the
impact somewhat. Since March 2005, fuel prices have
continued to increase to the point that they are now
affecting inflation in South Africa. Although inflation
remains well within the targeted range of 3-6%, the South
African Reserve Bank (SARB) cited rising oil prices as a
major inflationary threat, and decided not to lower the
repurchase rate at its last Monetary Policy Committee
meeting in mid-August as it otherwise might have. Rising
oil prices caused producer and consumer inflation to
substantially increase in July. End Summary.

Government Announces Further Price Increases
--------------


2. (U) On September 7, the Department of Minerals and
Energy (DME) increased the retail price of gasoline in
rand terms by 5.1%, the wholesale price of kerosene by an
average of 2.4%, and the wholesale price of diesel by
just 0.03%, (2 rand cents). This was on top of August
increases of 5.0% for retail gasoline, and 3.1% for
wholesale kerosene, and 3.7% wholesale diesel. Since
August, the rand had strengthened by 3.5%, but this was
not enough to compensate for the rise in the
international price of crude oil, which was entirely
responsible for this month's price increases. The tables
below show the increases in the average price of fuel in
Johannesburg and components for the new price.

Wholesale Johannesburg Prices
(U.S. Dollars/Gallon)

July Aug Sept %Change
Gasoline - (retail) 2.99 3.16 3.45 +9.1
Diesel - 0.3% Sulfur 2.89 3.00 3.10 +3.2
Diesel - 0.05% Sulfur 3.02 3.13 3.23 +3.2
Kerosene 2.26 2.36 2.50 +6.0


Wholesale Johannesburg Prices
(S.A. Rands/Liter)

Gasoline - (retail) 5.35 5.62 5.91 +5.1
Diesel - 0.3% Sulfur 5.17 5.33 5.31 -0.3
Diesel - 0.05% Sulfur 5.40 5.57 5.54 -0.5
Kerosene 4.04 4.19 4.29 +2.4

SEVEN MONTHS OF RISING OIL PRICES FEEDS INFLATION
-------------- --------------


3. Since March 2005, fuel prices have continued to
increase to the point that they are now affecting
inflation in South Africa. Rising oil prices caused
producer and consumer inflation to substantially increase
in July. CPIX (inflation minus mortgage costs, used by
the SARB to measure inflation) increased 4.2% in July, up
from June's 3.5% increase. July's producer prices
increased more than 50% above the previous month (when
comparing year-on-year changes). Prices of petroleum and
coal products more than doubled, and prices of
agricultural products, paper, and basic metals rose in
July as the downstream impact of seven months' of rising
fuel prices began to filter through to the rest of the
economy.


4. Although inflation remains well within the country's
targeted inflation range of 3-6%, the SARB cited rising
oil prices as an inflationary threat and elected to not
lower its repurchase rate at its Monetary Policy
Committee meeting in mid-August -- despite the country's
persistent interest rate differential with major trading
partners. Future crude oil price increases may well
prevent the SARB from further reducing this differential.
While a strong rand has helped mitigate some of the
impact of higher oil prices, it has also resulted in
higher costs for South African manufacturers who export,
and muted the country's supply response to a growing
world market for mineral commodities.
TEITELBAUM