Absa Capital principal economist Peter Worthington remains optimistic that the South African consumer could still benefit to the tune of R12-billion over the course of 2015 as a result of lower fuel prices, notwithstanding the recent weaking in the rand against the US dollar, a recovery in the crude oil price and the 80.5 c/ℓ hike in the fuel levy from April 1.

Speaking at an economic policy dialogue hosted by the Department of Trade and Industry, Worthington’s prognosis diverged somewhat from that of his co-panelist Annabel Bishop, who is chief economist at Investec. She argued that the R3.26/ℓ reduction in the petrol price enjoyed until the end of February would be all but removed by the start of April.

In fact, Bishop noted that, besides the 96 c/ℓ rise in the petrol price at the beginning of March and the increase in the fuel levy announced by Finance Minister Nhlanhla Nene in his February Budget address, the fuel price-setting formula was also currently showing an under recovery of more than 100 c/ℓ.

“If you add all that up it actually then removes [from April] the cut that we’ve had of R3.26/ℓ,” she outlined, adding that Investec was forecasting an average oil price for the year of between $55/bl and $60/bl.

However, Worthington took his lead from the Barclays affiliate’s view that oil prices, which had recovered to around $60/bl from a January low of $46/bl, would weaken in the second quarter, owing to global supply/demand dynamics.

The International Energy Agency Oil prices also indicated that prices might have stabilised only temporarily, owing to the fact that the global oil glut was worsening as US production showed little sign of slowing.

The agency had even warned that the US might run out of capacity to store crude, which could put additional downward pressure on prices.

In February, non-Organisation of the Petroleum Exporting Countries production was estimated to have risen by about 270 000 bbl/d to 57.3-million barrels a day. Global supply, meanwhile, rose by 1.3-million barrels a day year-on-year to an estimated 94-million barrels a day in February.

Absa Capital was also expecting the rand to recover somewhat against the currently rampant dollar, which has seen the South African currency weaken to well below R12 against the greenback to trade at near 13-year lows.

“At the moment, our forecast for petrol prices in 2015 – in the wake of the Budget, in the wake of understanding that we are going to get some further prices increases coming through, driven by crude and exchange rate movements – is that it will be R11.94/ℓ compared with R13.62/ℓ previously. It’s still a material decline and it’s enough to add, in our estimate, about R12-billion into consumers’ pockets relative to last year,” Worthington outlined.

However, he stressed that when he did the calculation a few months back the benefit to consumers was closer to R23-billion, which would have equated to almost 1% of household consumption.

“That would have been a significant boost to spending, but Minister Nene needed to raise tax monies from somewhere and the fuel levy was a relatively palatable option. I wonder, though, if he’d known just how quickly crude prices would bounce, whether the increase in the fuel levy would have been as much as it is?”