Good news about petrol and diesel prices comes with a sting in the tail

South African motorists can expect to feel some relief when filling up at the pump next week, with both petrol and diesel prices set to fall. 

Diesel is expected to fall significantly, with petrol prices offering limited relief as the rand strengthens and oil prices fall. 

The decline in petrol prices is not enough to offset the reintroduction of the R1.50 per litre General Fuel Levy, as the National Treasury begins phasing out its fuel relief. This will push petrol prices at the pumps higher.

The decline in the expected fuel prices, excluding the reintroduction of the relief, is on the back of improved sentiment towards South African assets, with Moody’s having upgraded its outlook for the country’s credit rating. 

The upgrade has been coupled with falling oil prices amid positive news about a potential deal between Iran and the United States to reopen the Strait of Hormuz. 

These positive developments are pushing projections for fuel prices in June lower, with the Central Energy Fund (CEF) forecasting the following changes –

• Petrol 93 – decrease of 26 cents per litre
• Petrol 95 – decrease of 21 cents per litre
• Diesel 0.05% – decrease of 529 cents per litre
• Diesel 0.005% – decrease of 480 cents per litre

These declines are expected to be officially announced by the Department of Mineral and Petroleum Resources, provided no significant changes occur. 

However, motorists using petrol will not experience any relief at the pumps as the National Treasury begins phasing out its fuel price relief, which cut the General Fuel Levy on petrol by R3.

From June, R1.50 per litre will be added back, with the full relief terminating in July, when the remaining R1.50 will be added. This will turn the potential cut into an increase.

Increased positivity surrounding a deal to free up oil exports from the Strait of Hormuz has pushed the price of Brent crude down by over 7% in the past month. 

Around 20% of all global oil exports flow through the Strait on a daily basis, making it one of the most significant chokepoints for the market. 

A deal between the United States and Iran appears to be close, with US Secretary of State Marco Rubio saying a peace pact will take a few days to finalise. 

The positivity does not only surround a potential deal, as sentiment is also buoyed by tankers beginning to transit the Strait, albeit on a limited basis. 

Bloomberg reported that two non-Iranian supertankers exited the Strait on Tuesday, which is the first example of sanctioned oil crossing the chokepoint in weeks. 

However, it is unlikely that the oil price will fall to levels seen before the US-Israeli strikes on Iran at the end of February, as it will take time to restart production. 

Old Mutual Investment Group (OMIG) expects oil to remain elevated for the rest of 2026 even if a peace deal is secured in the near term. 

The other main factor in petrol and diesel prices is the rand-dollar exchange rate, where the local currency has held its own amid global turmoil. 

Typically, in periods of elevated geopolitical tension, the rand comes under immense pressure as a proxy for sentiment towards emerging markets. 

This has not been the case this time around, with South Africa’s improving state finances and a lower inflation target supporting a more stable and stronger currency. 

The National Treasury expects South Africa’s debt-to-GDP ratio to stabilise in the current year, with its efforts being viewed in a positive light by rating agencies. 

Moody’s most recently upgraded its outlook for South Africa’s credit rating on the back of the country’s continued focus on structural reforms and fiscal consolidation. 

This has boosted the rand alongside elevated precious metals prices, which have supported export earnings over the past year. 

The following graph from the CEF shows the decline in imported fuel prices, which should translate into lower prices at the pump.