Big swing for petrol prices in South Africa

Fuel price recoveries are swinging in the right direction for motorists in South Africa, with diesel now lining up for a cut in March, and the big petrol price increase projected at the start of the month shrinking.

The latest data from the Central Energy Fund (CEF) for the end of the third week in February shows that petrol and diesel prices have fared much better.

While petrol prices are still lined up for a hike next month, the under-recovery has decreased from around 60 cents per litre at the start of February to between 5 and 18 cents, depending on the grade.

Diesel prices, meanwhile, have staged a complete turnaround, shifting from a projected increase at the start of the month to a cut of between 4 and 11 cents per litre.

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

• Petrol 93: increase of 18 cents per litre
• Petrol 95: increase of 5 cents per litre
• Diesel 0.05% (wholesale): decrease of 4 cents per litre
• Diesel 0.005% (wholesale): decrease of 11 cents per litre
• Illuminating paraffin: increase of 7 cents per litre

Local fuel pricing has been helped along by a relatively stronger rand and flat global oil prices.

Oil prices are still the main reason prices are showing an under-recovery. Despite weakening to below $75 a barrel in February, uncertainty over supplies and a weaker US dollar have kept pricing range-bound.

With one final week to go before month’s end, the current trajectory shows a possibility for at least 95 Petrol to swing into over-recovery territory.

This week, Brent crude prices increased 2% to over $76 a barrel—the biggest climb in pricing since January.

The market is facing a great deal of uncertainty, with pressure coming from both the supply and demand side of the equation.

On the supply side, rising stockpiles in the US have been putting downward pressure on prices, pointing to a possible oversupply in the market.

US President Donald Trump’s push for tariffs and escalating trade war are also dampening demand and weighing on prices.

Conversely, oil-producing nations (OPEC+) have indicated that they may delay production increases, adding upward pressure to prices.

According to Bloomberg analysis of the market, the weaker dollar has also made commodities more attractive for many buyers, lifting prices.

The dollar is facing a lot of uncertainty in the market, given Trump’s chaotic leadership style, which is ultimately benefitting the rand and aiding fuel price recoveries.

This comes as some relief, given the headwinds the local unit had to face this week.

In an unprecedented move, the National Treasury cancelled the 2025 Budget Speech scheduled for Wednesday, 19 February, and moved it to 12 March.

The decision was made over disagreements between Government of National Unity (GNU) partners over proposed tax hikes—specifically a two percentage point VAT hike to 17%.

Citadel Global director Bianca Botes noted that the delay sent ripples through the market, with the rand weakening just over 1% as a result.

“Markets are concerned that the dispute around the budget might point to larger cracks in the Government of National Unity,” she said.

However, thanks to the weaker dollar, the impact on the rand was not as severe, with the local unit recovering by week-end.

The rand is actually now trading stronger than the pre-budget delay.

But the delay and the GNU’s debate over the budget will have a wider impact on petrol prices going forward.

Finance Minister Enoch Godonwana made it clear that the VAT hike to 17% would be softened by relief in other taxes—such as freezing the fuel and Road Accident Fund levy for another year.

Should the GNU decide to scrap the VAT hike, then revenue will have to be sourced elsewhere, which makes it very likely that higher fuel taxes could be on the way.