South Africa set for petrol price relief 

Petrol and diesel prices are set to decrease next month in South Africa, with the country’s election potentially leading to a sharp decline in prices due to a strengthening rand. 

Data from the Central Energy Fund is currently showing an overrecovery in petrol and diesel prices, which would lead to decreases in the price of fuel. 

The price of petrol and diesel in South Africa has risen steadily throughout 2024. Petrol prices rose in May, while diesel saw a slight decrease. 

This is largely due to a decrease in the price of oil but the rand has also strengthened of late, making the import of oil cheaper in dollar terms. 

The data shows the following changes to fuel prices in June –

• Petrol 95 – decrease of 61.45 cents 
• Petrol 93 – decrease of 62.63 cents 
• Diesel 0.05% – decrease of 73.62 cents 
• Diesel 0.005% – decrease of 77.13 cents 

Investment analyst at FNB Wealth and Investments, Sithembile Bopela, and senior economist Koketso Mano have recently unpacked why South Africans could experience even further fuel price relief in the second half of 2024.

The drop in diesel prices can be attributed to waning demand globally. Diesel is primarily used for machinery and home heating, while petrol is the preferred fuel for powering cars.

With the Northern Hemisphere approaching summer months, there is generally a slowdown in economic activity as people enjoy the warm weather and a reduced need for home heating.

This change in season has the opposite effect on petrol prices as demand tends to increase as people in the northern hemisphere drive their cars more often. 

However, Bopela and Mano expect this effect to be minimal and the overall demand for petrol and diesel to decline, resulting in lower fuel prices. 

They acknowledged that the price of Brent crude remains elevated from its starting position of $75 a barrel at the beginning of the year. 

However, global economic growth constraints, hawkish sentiments from the US Federal Reserve, and a large regional crude inventory build will cap further upside to oil prices.

The oil market is expected to be finely balanced this year. As global growth troughs, OPEC+ output restraint is required to counter growing non-OPEC supply from the Americas. 

Even as global growth forecasts have ticked higher, the risk of tighter monetary policy could further stifle demand. 

With oil production and demand expected to be balanced throughout the year, the largest determinant of the price of petrol and diesel in South Africa will be the strength of the rand. 

Bopela and Mano expect the rand to strengthen following the country’s election later this month as the market will shed the political uncertainty experienced during the build-up. 

This positive effect could be compounded by a positive election outcome, which has become more likely in recent weeks as the ruling ANC’s support has recovered, reducing its need to form a coalition with other left-wing parties.