Petrol price cuts lined up for May

The good news keep rolling for petrol and diesel prices in South Africa with data from the Central Energy Fund (CEF) showing over-recoveries sticking.

The data for the end of the third week in April shows that petrol is still showing an over-recovery of between 19 and 21 cents per litre, while diesel has an over-recovery of 38 cents per litre.

This is continuation of the positive footing from the start of the month, despite global uncertainty, and shows an upward trend for petrol from the mid-month assessment.

These are the projections at the end of week three:

• Petrol 93: decrease of 19 cents per litre
• Petrol 95: decrease of 21 cents per litre
• Diesel 0.05% (wholesale): decrease of 38 cents per litre
• Diesel 0.005% (wholesale): decrease of 38 cents per litre
• Illuminating paraffin: decrease of 30 cents per litre

The over-recovery is still due to the massive drop in global oil prices following the implementation of US President Donald Trump’s universal 10% tariff on 5 April.

Trump’s move in the first week of April caused massive upheaval in global markets as forecasters moved to digest the impact of the tariffs.

The impact on global growth was an immediate worry, with economists predicting a massive slowdown in productivity, hitting oil prices hard.

Amid an expected glut from higher-than-expected levels of production, the hit on demand because of the tariffs sent oil prices tumbling to sub $63 a barrel.

As the Trump administration started walking bank on the tariffs and taking a softer approach to negotiations with large economies like China, the oil price started recovering.

The White House has floated cuts to the substantial tariffs imposed on China, and Trump has walked back previous aggression towards US Fed chair Jerome Powell, restoring some strength to markets.

However, it has not recovered to previous levels and the spot price of Brent Crude still sits below $70 a barrel—currently at $68 a barrel.

The rand, meanwhile, has recovered significantly from the worst-ever levels of R19.93 seen around the same time as Trump’s tariff war kicked off.

Unfortunately for motorists, the currency exchange is still working against recoveries, undercutting gains from the lower oil price by around 33 cents per litre.

The rand weakened substantially at the start of the month as parties within the Government of National Unity turned on each other over the 2025 budget, putting the future of the coalition in question.

The Democratic Alliance did not support the budget before, during and after the vote to adopt the fiscal framework, and the ANC shirked its partners and opted to find support outside the coalition.

Both parties regarded this as a betrayal to the GNU, leaving the grouping hanging by a thread.

While both have since recommitted to the GNU, the ANC has opened up talks with other parties over the future of the GNU, and questions around the budget and key points of contention, like the VAT hike, remain unanswered.

Along with the global turmoil from the Trump tariff war, the market remains risk averse and shaken by local politics, keeping the rand under pressure, and far from its R17.50/$ levels before the fall.

Good for inflation and interest rates

Despite the local tensions and global uncertainty, the impact on fuel recoveries has been relatively stable throughout the month, with the oil price and exchange rate keeping things in balance with a positive tilt.

Should the current conditions carry through to the end of the month, this will not only give some slight relief to motorists at the pumps, it should also feed through to more positive inflation data.

Stats SA published the latest consumer price inflation figures for March 2025, showing a much lower than anticipated figure of 2.7%—the lowest levels since the Covid-19 pandemic years.

March saw little change in the petrol price with only a 7c/litre reduction, accordingly the transport component of the CPI basket had no effect on the monthly inflation outcome.

It however detracted 0.4 of a percentage point from the annual reading versus 0.1 of a percentage point in February.

A more substantial petrol price decrease was implemented in April which will contribute to reducing inflationary pressure during that month.

If another cut comes in May, the trend will continue, giving impetus for the Reserve Bank to possibly cut interest rates in the country despite the global uncertainty.

Positively, economists at Nedbank noted that the persistently lower global oul prices suggests that the deflationary force from domestic fuel prices will last longer than initially anticipated.

Given the wider uncertainty in global markets and the looming impact of the VAT hike to 15.5% from 1 May, economists expect the SARB to remain cautious and hold on rates.

However, with South Africa’s economic growth stagnating and inflation coming in much lower than its target range, there are hopes that the Monetary Policy Committee will swing the axe in favour of consumers.

The SARB’s model shows room for at least one more rate cut of 25 basis points in 2025.

“The MPC will now have to weigh the benign inflation outlook against the potential upside risks that could emanate from the highly volatile and uncertain global environment,” Nedbank said.

“While they may prefer to wait-and-see how global conditions evolve, there appears to be space for another rate cut if the rand holds at current levels.”