Bad news for South African motorists – more petrol price hikes expected 

Petrol and diesel prices are set to rise in the next few months as the price of oil nears $100 per barrel due to supply shocks around the world.

This is feedback from portfolio specialist at Ninety One, Muhammad Docrat, who told 702 that the oil price has been hit by a near-perfect storm, resulting in the probability of it hitting $100 per barrel increasing.

“Unfortunately for South Africans, we are likely to see upward pressure on petrol and diesel prices at the pump,” Docrat said. 

“It has been a perfect storm for the oil price with supply disruptions worldwide, from the Middle East to North America.” 

In particular, following Israel’s strikes on the Iranian embassy in Damascus, the chance of a large, conventional war in the Middle East is rising. 

As the region is one of the largest suppliers of crude oil, this has sent shockwaves throughout oil markets and caused the price to shoot up. 

This has compounded the already significant impact of disruptions to shipping through the Suez Canal, with oil tankers from the Middle East being forced to go around the southern tip of Africa. 

Other supply disruptions, including in Russia and the United States, are reducing output from key suppliers at the same time. 

Ukrainian drones are striking energy infrastructure deep within Russia, forcing the country to reduce its crude oil output. This further exacerbates the supply-demand imbalance, pushing the oil price up. 

In the United States, output reached record highs towards the end of 2023 but has since come down due to freezing weather at the beginning of 2024.

At the same time, the Organisation of Petroleum Exporting Countries (OPEC) is maintaining its production cuts to the end of the second quarter and imposed stricter enforcement of these limits. 

Adding to the effect of these supply shocks on the price of oil is the rising demand for fuel in the northern hemisphere as it enters summer and people there begin to drive more. 

Oil may hit $100 per barrel, but Docrat thinks this will be short-lived as supply disruptions are unlikely to last forever, and there is spare capacity to meet increased demand. 

He explained that OPEC has around five million barrels per day of spare capacity, which it will tap if the oil price remains elevated to capitalise on the higher price. 

However, in the short term, the price of petrol and diesel at South African pumps will remain elevated and is likely to tick higher in the coming months.