Good news for petrol prices in South Africa next month
With the rand strengthening and oil prices holding steady at lower rates, petrol prices in South Africa are lined up for a nice cut in August.
However, diesel prices are still on track for a hike in two weeks, with global shortages putting upward pressure on fuel price recoveries.
The latest data from the Central Energy Fund (CEF) for the end of the third week of July shows that petrol prices are building and maintaining an over-recovery of around 25 cents per litre.
Lower global oil prices relative to June and a more stable rand/dollar exchange have aided the over-recovery.
According to the CEF’s data, this is how recoveries stand at the end of week three in July:
- Petrol 93: decrease of 28 cents per litre
- Petrol 95: decrease of 24 cents per litre
- Diesel 0.05% (wholesale): increase of 66 cents per litre
- Diesel 0.005% (wholesale): increase of 64 cents per litre
- Illuminating paraffin: increase of 30 cents per litre
The pricing difference between petrol and diesel diverged in mid-June when Israel escalated the war in the Middle East by attacking Iran.
This sent global oil prices rocketing to over $80 a barrel. However, prices quickly recovered and have been sitting under $70 for the past four weeks.
While this was reflected in petrol price recoveries, diesel price recoveries were hit by other external dynamics, with seasonal demand for fuel increasing amid concerns over supply.
As a result, while global product prices for petrol have come down to the extent that cuts are forecast, diesel prices have gone in the opposite direction.
Positively, Bloomberg’s market analysis points to continued softness in global oil prices as forecasters eye the United States’ incoming tariffs, which are slated to go live on 1 August.
According to the group, this has caused concerns that the tariff war will stifle consumption, while oil producers (OPEC+) bring back production.
This would apply downward pressure on crude, which is already trading about 8% weaker this year, the group said.
Local petrol and diesel price recoveries should benefit from this, although not in the near-term (ie, for August adjustments), and not in the same scale, given the market divergence between the fuel types.
The rand is going stronger
More positive news for motorists is that the rand/dollar exchange is also on their side.
The rand remained relatively stable in July, even with the United States’s upcoming 30% tariff.
Notably, the rand started the week heading in the wrong direction, led by dollar strength. After holding quite firmly at around R17.70 for much of the month, it pushed back towards R18.00 to the dollar.
However, on Wednesday (23 July), the rand reversed course to around R17.55 to the dollar, as local tensions in the Government of National Unity (GNU) eased.
Temperatures inside the grand coalition have been running high for months, with the two biggest parties, the ANC and DA, butting heads over multiple issues.
There were big concerns that the 2025 Budget would falter at the final hurdle, with the DA voting against departmental budgets governed by ANC officials accused of corruption.
However, the party confirmed on Tuesday evening that it would vote to pass the necessary bills to make the budget work, after President Cyril Ramaphosa gave in to its demands to fire at least one of the accused.
This boosted the rand, as confidence was restored that threats to the budget had now passed.
Aside from these issues, the rand has been largely trading at the whims of the dollar’s movements rather than reflecting anything happening back home.
The dollar has been slowly gaining since the start of the month, mainly due to global market risk aversion tied to the Trump administration’s erratic tariff and foreign trade policies.
According to Investec chief economist Annabel Bishop, the exchanges have also been impacted by forecasts for US interest rate cuts, which have been pushed out to late 2025 and early 2026.
Worryingly, Bishop noted that the incoming 30% tariff threat on South Africa has not yet been fully factored into the rand exchange, both from an economic perspective and from a sentiment issue.
As a result, the rand has not seen depreciation on its own this month, but this could change in the next few weeks.
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