THE Automobile Association has warned of a large fuel price increase.

The AA says the Rand weakness could undo the recent fuel price stability based on the unaudited mid-month fuel price data released by the Central Energy Fund (CEF).

According to the AA, almost two months of the improving Rand strength ended in a dramatic reversal as the local currency was caught up in the emerging market chaos triggered by Turkey's economic difficulties.

“Until the crisis hit, the fuel price picture for August had been flat, with data predicting modest declines in all fuel types at month-end, thanks to reasonable stability in the Rand and international oil prices,” the AA said.

Mid-month data suggests a fall in petrol of around two cents, with four cents and eight cent drops predicted for diesel and paraffin respectively.

However, the AA stated that the daily exchange rate for the Rand fell nearly nine percent against the US dollar in two days after the news of Turkey's troubles broke, and remains well above its recent trend.

This has tipped petrol towards a likely increase at month end, and greatly offset the gains made by diesel and paraffin.

THE AA says the tendency of investors in regarding emerging markets as a single basket means that further negative news out of Istanbul is likely to be bad for the Rand and South Africa's fuel users too.