the corner office

There was an interesting discussion tonight on the MoneyWeb Power Hour on Radio 2000, about where our petrol price is headed. Next week will see an increase of around 23c. It was going to be 18c, until Hurricane Katrina. As it stands, there's a 90c underrecovery on the petrol price. The only reason we're not getting nailed a full 90c next week is because the monthly price adjustments are based on averages for the full prior month. What that means is we won't see a major price bump now, but if the huge refining setbacks caused by Katrina aren't sorted out soon, we're in for a nasty surprise come October.

Some interesting numbers which came out of the show: the current petrol price is split into about R3 overseas cost (ie. suppliers) and R2.50 going to duties (ie. tax) and local margins and supply costs. Also petrol duties net the government around R18 billion a year. Nothing to sniff at.

The one thing that amazes me is that we've managed to maintain a circa-4% inflation rate despite the jumps in the fuel price. The only way I can explain it is that (a) our inflation would be far lower without these oil price increases, (b) the stronger rand is helping to offset some of the inflationary pressures, and (c) something has to give, eventually.