Best news for petrol prices in South Africa since 2021

The rand oil price is now at its lowest level since September 2021, with oil on track for a record production surplus in 2026 and the rand strengthening on a weaker dollar. 

South Africa’s rand has also been holding its own due to improving domestic fundamentals, with the government’s finances steadily improving. 

This should translate into lower petrol prices in 2026 for South Africans, with the basic fuel prices being made up of the international price of oil and the rand-dollar exchange rate. 

However, the significant taxes levied on fuel in South Africa limit the potential relief for motorists, with these administered elements steadily growing as a share of the overall fuel price in South Africa. 

Chief investment strategist at Old Mutual’s Symmetry, Izak Odendaal, noted that the rand oil price is now the lowest it has been since September 2021. 

More importantly for motorists, the price is 20% below the levels it was at just a year ago, promising sustained relief at the pumps. 

Furthermore, this should translate into subdued inflation in 2026, which is crucially important for the Reserve Bank to meet its new 3% target. 

This has the potential to substantially boost the spending power of South Africans, driving faster economic growth in the near term. 

For the economic growth required to significantly impact the country’s elevated unemployment rate, significantly higher fixed investment is needed. 

Oil prices are under heavy downward pressure, with the International Energy Agency (IEA) projecting a record surplus for 2026. 

The IEA’s projection is based on expected subdued demand and increased supply, particularly from the Organisation of Petroleum Exporting Countries (OPEC). 

OPEC has lifted production caps on its members for them to maintain their market share. This, however, will come with lower oil prices. 

The rand, on the other hand, has held its own against the dollar in recent months, having strengthened by over 9% against the greenback so far in 2025. 

This has been driven by South Africa’s improving fundamentals, with faster-than-expected economic growth and improving government finances. 

As a result, investors have increased their interest in South African assets, with the government raising $3.5 billion in a sale of dollar bonds that attracted demand for almost four times that amount.

This auction saw the rand trade at its strongest level in three years, hovering just below R17 to the US dollar.

The graph below, courtesy of Odendaal and Symmetry, shows the rand oil price over the past four years.  

Taxes limit relief

Around a third of the price of fuel charged at the pumps is made up of taxes levied by the National Treasury to fund government expenditures.

This significantly limits the potential relief of a lower oil price, as these taxes are consistently levied at the same rate. 

The National Treasury’s data shows that South Africans pay R6.37 in taxes for each litre of 93-octane petrol and R6.24 per litre of diesel at the pumps.

This is primarily comprised of the General Fuel Levy (GFL), the Road Accident Fund (RAF) Levy, the customs and excise levy, and a carbon tax. 

The funds generated by these taxes, apart from the RAF levy, generate revenue for the central government, which can be used as it sees fit. 

In this year’s Budget, the Finance Minister implemented an inflation-linked increase to the GFL for petrol and diesel to help make up for the lost revenue after the VAT hike was withdrawn. 

This resulted in the GFL increasing to R4.01 per litre for 93-octane petrol and R3.85 per litre for diesel, making it the largest tax levied on the price of fuel in South Africa by some distance. 

The taxes levied on fuel in South Africa are a significant contributor to the high price of petrol and diesel in the country.

These taxes have also risen significantly over the past decade, far outstripping the headline inflation rate to push fuel prices higher. 

The GFL, for example, has risen by 57.25% since 2015, while the RAF levy has shot up by 41.56%. The customs and excise duty has remained unchanged. 

In total, these taxes have risen by R4.13 for each litre of 93-octane petrol to R6.23 in 2025 – an increase of 50.85% in a decade.

This excludes other levies and margins added to the price of fuel by the Department of Mineral and Petroleum Resources. 

These include the transport cost of moving the fuel, the petroleum products levy, the wholesale margin, the retail margin, and the storage margin.