More massive petrol price hikes expected in March

South Africans should brace for further petrol and diesel price hikes in March due to a rise in global oil prices and a weaker rand. 

Data from the Central Energy Fund shows petrol prices may rise by as much as R1.35 per litre in March, while diesel will potentially go up by between R1.40 to R1.60 per litre. 

These increases will come on the back of a significant increase in fuel prices for February. Petrol prices increased by 75 cents per litre across both grades, and the price of diesel rose by between 70 cents and 73 cents per litre.

The price of oil rebounded at the beginning of February, largely due to geopolitical tension and the conflict in the Middle East, which has disrupted ocean freight, including oil exports. 

The effect of the rise in the price of oil has been compounded by the rand weakening in the first two weeks of February. 

This has resulted in the Central Energy Fund data indicating the potential increases below:

• Petrol 93: increase of 135 cents per litre
• Petrol 95: increase of 131 cents per litre
• Diesel 0.05% (wholesale): increase of 143 cents per litre
• Diesel 0.005% (wholesale): increase of 159 cents per litre

The rand weakened to R19.15/USD at the end of last week as the local currency felt the pressure of rising uncertainty surrounding South Africa’s fiscal policy and elections.

Investec chief economist Annabel Bishop said multiple factors are dragging down the rand, including President Cyril Ramaphosa’s disappointing State of the Nation Address.

In addition, the upcoming Budget next week is expected to show that the government likely missed the budget it set for itself in the Medium-Term Budget Policy Statement in November last year, meaning efforts to control fiscal spending are still on hold.

South Africa’s economic growth in 2023 has also disappointed, with the economy at risk of a recession.

Another factor weighing negatively on the rand is the political heat that has increased substantially this year ahead of the national elections.

The uncertainty ahead of South Africa’s election is putting a damper on the domestic currency, with the date not yet set.

“While it is too early to rely on the election poll outcomes for any firm predictions of exact results, a coalition government is the most likely outcome, which is seen to add to volatility,” Bishop said.

The expected increase in petrol prices in March will add to the rising cost of living South Africans are experiencing, with spending on fuel taking up a larger share of their total spending. 

Spending on petrol has risen to over 8% as a share of total spending by South Africans, Standard Bank chief economist Goolam Ballim said at the Economy 2024 event.

South Africans forking out more money for fuel has little to do with increased consumption and more because of sharp increases in the price of fuel.

In the past two years, Ballim said the petrol price has increased 54%. This figure excludes the latest price hike of over 70 cents a litre for both petrol and diesel.