From R20.19 to R24.63 for a litre of petrol in South Africa

South African motorists are set to feel the pain at the pumps come April, as the ongoing Middle East conflict, a weaker rand, and incoming fuel taxes will push up the price of fuel significantly.

Based on current forecasts using the exchange rate and international oil prices, the Central Energy Fund projects that South Africans will see the following increases at the start of April –

• Petrol 95 – R4.94 increase
• Petrol 93 – R4.44 increase
• Diesel 0.05% – R8.05 increase
• Diesel 0.005% – R8.16 increase

This means a litre of petrol 93 will go from around R20.19 to R24.63, or up to R985.20 for a 40-litre tank.

The significant rise in fuel prices expected for April is due to a confluence of factors, the most pressing being the ongoing US/Israel war against Iran.

The Middle East conflict has led to the Strait of Hormuz, a key shipping corridor used to transport a large percentage of global oil supply, being effectively shut off.

This has already seen global oil prices skyrocket, with Brent crude oil now standing at well over $100 a barrel.

As a net oil importer, South Africa will be affected by higher oil prices, with around half of the price motorists pay at the pumps determined by global oil prices.

At the same time, South Africa’s rand has been caught in the Middle East war crossfire, as the heightened uncertainty surrounding the conflict has sent investors running to safe-haven assets like the US dollar.

Therefore, the greenback has strengthened significantly since the start of the war, putting downward pressure on the rand’s value.

On Thursday, 19 March, the rand was trading at around R16.92 per US dollar, with fears rising that the currency may cross the R17/USD threshold and stay there if the war does not end soon.

The combination of higher global oil prices and a weaker rand will inevitably impact fuel prices in South Africa, with increases expected to come in the first week of April.

Fuel taxes

While the rising global oil price and weak rand will increase South Africa’s fuel prices come April, these are not factors within the government’s control.

What is in the government’s control, however, are the increased fuel taxes that are also set to come into effect in April and push up prices at the pump.

Nearly a third of the fuel price in South Africa is made up of taxes, including the General Fuel Levy, Road Accident Fund Levy, and the Carbon Tax.

All three of these taxes are slated to increase at the start of April, which will add to the pain motorists feel at the pumps next month.

North-West University Business School economist Professor Raymond Parsons has warned that the convergence of a high oil price, weak rand, and increased fuel taxes on April 1 creates the prospect of a “concentrated cost shock” for consumers and businesses.

“This outcome is likely to intensify cost-of-living pressures, especially for the poor, and also increases business operating costs,” he said. 

“Both the economic and psychological impact of such a clustered shock should not be underestimated. Mitigating steps need to be considered.”

The National Treasury recently said it has little room to mitigate the impact of the looming fuel-price shock.

“Unless you have those kind of resources, which currently we do not have available as part of our fiscal buffers, you are either looking at no relief, or you’re looking at a very small amount of relief,” the Treasury’s director-general, Duncan Pieterse, said.

Minister of Mineral and Petroleum Resources Gwede Mantashe said in a recent statement that, as a net importer of petroleum products, South Africa remains inherently exposed to external dynamics driving fuel price increases. 

“Sustained increases in international oil prices, coupled with exchange rate fluctuations, are expected to translate into higher domestic fuel prices in the months ahead,” he said.

However, he assured South Africans that the country’s fuel supply remains stable in the immediate term, notwithstanding the heightened volatility in global energy markets.