R1.00 per litre petrol price pain for South Africa

South Africa’s fuel price recoveries are continuing their negative slide, with both petrol and diesel lined up for big hikes in February.
The latest data from the Central Energy Fund (CEF) 21 days into the new year (three weeks) shows that diesel is well over the R1.00 mark, with prices expected to climb between R1.10 and R1.15 per litre next month.
Petrol, meanwhile, has continued to climb to R1.00 per litre, with recoveries sitting at 89 to 95 cents per litre.
South Africa’s fuel price recoveries have steadily declined throughout the month, driven by a weaker rand and higher global oil prices relative to December.
The rand started the year off on the back foot, reaching as high as R19.23/USD last week. By comparison, the rand reached R17.60/USD in December.
The unit pulled back ahead of the Trump inauguration on Monday (20 January 2025) as some market tension eased on what lies ahead for his second term as president, but emerging markets remained volatile.
The rand is currently trading at around R18.60 to the dollar, contributing between 40 and 45 cents per litre to the under-recovery.
According to Investec chief economist Annabel Bishop, volatility is likely to persist, but there should be some surety as the new US administration proceeds.
A lot of the tension in the currency markets relates to the expected interest rate path of the US Fed.
Before the Trump presidency, economists were factoring in multiple rate cuts throughout the year, weakening the dollar and boosting emerging market currencies like that rand.
However, following the US election results at the end of 2024 and the Fed’s final meeting in December, the tone had shifted dramatically with cuts seen much slower.
At the start of 2025, most forecasts pencilled in only one rate cut for 2025, feeding dollar strength at the expense of emerging markets. However, this has again shifted to maybe two, helping the rand in recent sessions.
For South Africa, the Reserve Bank is expected to take direction from the Fed, as cutting ahead of or beyond the US bank risks weakening the rand further due to the narrower interest rate differential.
This means that South Africa could see a much slower rate-cutting cycle as well.
Oil prices
Similar to currency markets, oil markets have also been volatile in the lead up to and post Donald Trump’s inauguration.
However, despite some ups and downs, futures have been trading higher relative to December, causing the under-recovery in local fuel pricing.
Higher oil prices are contributing between 47 and 69 cents per litre to the under-recovery, depending on fuel type.
According to Bloomberg analysis, oil markets are still digesting the new Trump presidency, including the slew of executive orders being doled out.
These include the threat of tariffs on Canada and plans to boost domestic US energy output.
“Trump held off unveiling China-specific levies on day one in office, instead ordering his administration to address unfair trade practices globally, according to a fact sheet seen by Bloomberg,” it said.
However, the initial sense of relief that trade measures weren’t an immediate focus of Trump’s ‘Day One’ was quickly offset by reports of 25% tariffs on Mexico and Canada.
“Crude started the year strongly after cold weather in the Northern Hemisphere led to higher heating demand and broad US sanctions on Russia’s oil industry upended global flows.
“Trump’s nominee for Treasury secretary said he would support dialing up measures on Moscow, which could mean more disruption. There’s also the prospect for sanctions on Iran and Venezuela,” Bloomberg said.
Trump said he plans to refill the US strategic oil reserve “right to the top” after it reached lows not seen since the 1980s, and signed an order to withdraw from the Paris Climate Agreement.
He also revoked offshore oil and gas leasing bans that effectively blocked drilling in most US coastal waters.
Other actions include an order to end a so-called electric-vehicle mandate, while he reiterated a call for the European Union to buy more US oil and gas if the bloc wants to avoid tariffs.
With Bloomberg