R1.50 petrol price relief for South African motorists

South African motorists are paying R1.50 per litre less to fill up their vehicles compared to a year ago, as global oil prices soften and the rand holds its own. 

This brings substantial relief for motorists and, more importantly, frees up additional cash for them to spend in the economy. 

In turn, this boosts demand and pushes economic growth higher, with consumer spending being one of the largest drivers of local economic activity. 

Coupled with lower inflation and interest rates, declining petrol prices may offset the knock of United States tariffs on the local economy and push growth to the highest level in years. 

This is feedback from Old Mutual Wealth’s chief investment strategist, Izak Odendaal, who outlined Trump’s “tariff tsunami” and the impact it could have on South Africa. 

In South Africa, the 30% tariffs on exports to the United States are a headwind but might be lowered in due course. Odendaal said whether this happens in time to avoid the worst effects is an open question.  

Several companies have already warned that export contracts to the United States and the associated jobs are at risk. 

The biggest concern is around the automotive industry, where decisions will be made at company headquarters in Germany or Japan.

At the start of the year, economists were pencilling in South African GDP growth of around 1.8% for 2025. This has now been cut to around 1% due to the tariff headwinds. 

However, Odendaal pointed out that this is still positive and higher than the last two years, with the country averaging an annual growth rate of 0.8% for the past decade.  

Crucially, there are some economic offsets to the imposition of tariffs on goods exported to the United States, which will minimise the negative impact and perhaps drive growth higher. 

The Reserve Bank has cut the repo rate by 125 basis points over the past year, while lower inflation, currently around 3%, raises real income growth. 

Petrol price relief

The growth in real income will be boosted by last week’s petrol price cut, with motorists paying R1.50 per litre less to fill up compared to a year ago.

Odendaal said this decline would not only boost local incomes but also help contain inflation in the future, potentially having a larger impact on economic growth. 

The decline in fuel prices over the past year has been largely driven by significantly lower international oil prices. 

Brent crude oil has declined by 19% in the past year as the Organisation for Petroleum Exporting Countries (OPEC) unwinds some of its supply cuts. 

The organisation has imposed production caps on its member states in an attempt to stabilise the oil market and artificially boost prices. 

However, as these production cuts were extended over the past few years, some member states began calling for them to be lifted as they lost market share to non-OPEC producers. 

This has resulted in a steady unwinding of production caps, unleashing additional supply into international oil markets. 

As a result, prices have come under further pressure as fresh supply comes online amid subdued demand from major economies. 

Fears of a global economic slowdown have hit oil demand, with traders betting on softening growth from China and the United States amid geopolitical tensions. 

On the other hand, the rand has held relatively steady against the US dollar over the past year as the greenback has come under pressure from the American government’s deteriorating financial health and the uncertainty caused by tariffs. 

So far in 2025, investors have shied away from investing in the traditional safe haven of US Treasury bonds, looking to Europe, Japan, and Switzerland for enhanced stability. 

This is largely a result of the increased uncertainty created by US President Donald Trump’s imposition of tariffs on the country’s trading partners and increased scepticism of the financial health of the US government.

The United States continues to run record deficits out of wartime, increasing its debt load to over $36 trillion, and resulting in it spending more on servicing its debt than on its renowned military. 

As a result, emerging market currencies, such as the rand, have strengthened against the dollar over a sustained period.

A stronger rand makes importing oil and petroleum products cheaper, pushing down local fuel prices. When combined with lower oil prices, this translates into significant relief for South African motorists.