More petrol price pain for South Africa

Fuel price recoveries at the end of the first week of February point to more petrol price pain the way for motorists in March.

The early-month price indicator shows an under-recovery of between 55 and 66 cents per litre for petrol and between 32 and 41 cents per litre for diesel.

The main driver behind the under-recovery is the global oil price, which, despite dropping significantly in the past week, is still catching up to the low average seen at the start of the year.

More positively, the month is starting out with a relatively flat over-recovery of just 1 cent per litre owing to the rand/dollar exchange rate.

These are the indicators for the end of week one in February:

• Petrol 93: increase of 51 cents per litre
• Petrol 95: increase of 39 cents per litre
• Diesel 0.05% (wholesale): increase of 32 cents per litre
• Diesel 0.005% (wholesale): increase of 41 cents per litre
• Illuminating paraffin: increase of 53 cents per litre

Global oil prices have receded significantly over the past few months after surging to around $85 a barrel in January after US President Donald Trump’s inauguration.

Prices are currently around $75 a barrel—though still higher, relative to the start of the year.

Uncertainty about Trump’s policies caused some concerns in the market, particularly about his plans to hit key trading partners with tariffs. Trump subsequently signed executive orders doing just that—although they have now been delayed.

According to Bloomberg analysis of the market, Trump’s tariffs on China is outweighing the new US administration’s first round of sanctions against Iran, tipping the scale towards demand-side pressures.

“Trump has slapped levies on all imports from China, with the world’s biggest oil importer countering with its own more restrained measures, which will come into force on Monday (10 February).

“The trade war—and the potential for it to spread—has stoked concerns that it will hamper growth in crude demand and lead to a glut later in the year,” Bloomberg said.

Looking at the rand, the local unit took a hit along with other emerging market currencies when Trump took aim at key markets. This was exacerbated when the US president targetted South Africa specifically.

While markets were rattled by Trump’s promise to pull funding from South Africa—putting its future as a beneficiary of AGOA into question—local events, such as a brief return of load shedding, president Ramaphosa’s SONA, and other factors also came into play.

The rand is currently trading at R18.42 to the dollar, a relatively flat position over the past week or so, and lower than the over R19.00/$ position it hit in mid-January.

Economists have forecast a volatile road ahead for the rand, likely to be at the whims of global geopolitics, and Trump’s trade wars.

Tough times ahead

If the current under-recoveries continue through to the end of the month, South African motorists will see a third month of price hikes, making it a difficult start to the year for the wider economy.

According to Henry van der Merwe, chairman of the South African Petroleum Retailers Association (SAPRA), the impact of rising fuel prices is a “lose-lose situation” for fuel retailers and consumers alike.

“When the fuel price increases, motorists naturally adapt by driving less and planning trips more carefully, which significantly reduces sales volumes for service stations,” he said.

“Even stations that buy on consignment don’t benefit from these changes. It’s a tough environment where station owners often face shrinking margins.”

Van der Merwe said that rising fuel prices could lead to a ripple effect across other sectors, pushing up the cost of goods and services due to increased transportation expenses. This, in turn, places upward pressure on inflation.

While South Africa’s inflation has come down significantly, hitting unexpected lows in the last months of 2024 and in early 2025, economists have warned that it is likely to trend upwards.

Inflation is not currently expected to move beyond the South African Reserve Bank’s target of 4.5%, but there is a degree of uncertainty in the wider global markets tied to US president Donald Trump’s impending tariff and trade wars.

The direction and potential impact of these policy moves remain to be fully seen, but the inflation risk is to the upside.

Van der Merwe said that motorists should be maintaining safe driving practices and careful planning to reduce fuel consumption and mitigate the rising costs.