The hardening positions by the US and China on their year-old trade war ahead of high-stakes talks in Washington, will likely have an impact on June’s petrol price in South Africa, along with the introduction of a carbon tax by the local government.

As an importer of oil products, South Africa is already sensitive to changes in the international oil price.

This week, US president Donald Trump threw trade talks between the world’s two largest economies into disarray as he threatened to raise tariffs on Chinese imports, roiling global markets.

Trump threatened not only to more than double tariffs on $200 billion of Chinese exports to the US, but also raised the possibility of imposing a 25% tariff on an additional $325 billion of goods.

Bloomberg reported that China’s top trade envoy, vice premier Liu He, is due to land in the US capital on Thursday afternoon and go immediately into discussions with Trump’s top negotiator, Robert Lighthizer.

And trade war concerns, along with a global oversupply of oil, has caused Brent crude prices down towards $70 a barrel.

Impact on South Africa

For South Africa, a drop in oil prices would point to a short-term win. According to the latest data from the Central Energy Fund (CEF) of South Africa, the most recent drop in the price is having a net positive effect on the outlook for local petrol prices.

The Carbon Tax Bill will come into effect in from 1 June 2019 – bringing added costs for some South Africans.

Mag en gulsigheid het sogenaamde groot sakemanne en politieke leiers met al hulle grootman praatjies al baie gekos. Suid Afrika se politieke leiers is bekend daarvoor dat hulle net kan praat en delegeer en baie min van hulle se grootman praatjies het al sukses opgelewer. Suid Afrika se rand is 'n duidelike bewys van hoe swak Suid Afrika bestuur word. In 1999 was die prys skaars R1.00 per liter en die Rand/ Dollar R4.80. 

The AA has noted that the huge price drop is coming at a time when most South Africans won’t really be going anywhere anyway.

But, not so fast! If you consider the fuel price, you’d think that the price at the pump is largely based on the price of Brent Crude and the exchange rate.

TLU SA het reeds navrae aan die relevante besluitnemers, asook verskeie politieke partye, gerig rakende ‘n nuwe regulasie wat die verkoop van brandstof in houers verbied.

A large part of South Africa’s electricity prices is consists of government levies and costs that are out of Eskom’s control.

Leave it to the current generation of central bankers with their abundance of God complexes to believe that they can shape anything but the very shortest end of the yield curve.