From June to the start of December the oil price fell 32,64%, while the price of petrol, shown on the chart in blue, fell by only 12,7%; why? The answer that immediately springs to mind is that we pay US dollars for oil with a devaluing currency. But, as the rand has lost only 3.09% over the same period, that answer seems not to stand up to scrutiny. I’d be delighted with an explanation on this apparent oddity.
Nevertheless, we motorists would be delighted if the present state of affairs, a falling petrol price could continue. Also delighted will be food shoppers who bear the cost of energy to produce the food and then get it to the shops.
The chart shows a continuation of the fall in the value of the rand that began in 2011 when the rand reached a low of $1/R66,5, which compares with the current rate of $1/R11. While not shown, I have used a point-and-figure chart of the dollar/rand exchange rate to give me a hint of what we may expect in the near future. The plotting has reached a significant formation, a triple bottom level of resistance. This shows that this is the third time that the exchange rate has tested this level.
It may of course bounce upwards again, but, if this resistance does not hold, there is a chance that the rand could strengthen to a much needed $1/R8,5 . While an optimist, I see no hope of this under the present administration, but as the pressure on the apparently absent Zuma continues, and his deputy, Ramaphosa takes over some of the reigns, finger-crossing is in order.
Frantic rises and falls in the oil price are not unknown, and typically, when one has taken place, the trend continues. The current fall has taken place in steps, a series of big falls, followed by slight rises. Again looking at a point-and-figure chart, there is an indication of a broken triple bottom in July at $110, which according to theory, gives a down-count to $8,47, or slightly above the current price. As the chart show, the plotting has dipped through the base of the standard error channel and now moving back into it. It is also at its most oversold for two years, which leads me to expect it to strengthen, but, hopefully, only slightly.